—Guide
RSUs and ESPP for Indian Employees of Foreign Companies: Tax and Reporting
How RSUs and ESPP shares from foreign parent companies are taxed for Indian employees — at vesting and on sale — and how to report them correctly.
Many Indian employees of multinational companies receive equity in the foreign parent: RSUs, stock options, or discounted shares through an employee stock purchase plan (ESPP). They're valuable, but the tax and reporting are often misunderstood. This guide explains how they work for residents.
Taxed as Salary When You Get the Shares
- RSUs: when they vest, the market value of the shares is taxed as salary.
- Stock options: when exercised, the difference between market value and the exercise price is taxed as salary.
- ESPP: when shares are purchased, the discount to market value is taxed as salary.
The Indian employer usually includes this in payroll and deducts TDS, sometimes by selling some of the shares to cover the tax.
Taxed as Capital Gains When You Sell
When you sell the shares, the gain over the value taxed as salary is a capital gain. Shares of foreign listed companies aren't listed in India, so the holding period for long-term treatment is 24 months, and the rates for unlisted shares apply.
Dividends
Dividends on the shares are taxable in India at slab rates. The foreign country usually withholds tax on dividends, and credit can be claimed in India with Form 67.
Foreign Asset Reporting
If you're resident and ordinarily resident, shares held in a foreign brokerage account must be reported in Schedule FA for each calendar year, whether or not you sold any. The brokerage account itself is also reported. Treatment of unvested awards should be considered carefully.
Selling and Bringing Money Home
Sale proceeds held abroad are part of your foreign assets until repatriated. There are FEMA rules on holding and repatriating proceeds from shares acquired under such schemes.
Common Mistakes
- Not reporting the brokerage account and shares in Schedule FA.
- Taxing the full sale price instead of the gain over the vesting value.
- Treating foreign shares as listed in India for capital gains rates.
- Not claiming credit for US tax withheld on dividends.
Getting Help
Think Filing handles RSU and ESPP taxation, capital gains and foreign asset reporting for employees of multinational companies.