Stage 1: Vesting Date (Perquisite Tax)

When your RSUs vest (or when you exercise ESOPs), the value of the shares is treated as perquisite salary income under Section 17(2) of the Income Tax Act.

Your employer calculates the Fair Market Value (FMV) on the vesting date, adds it to your monthly taxable salary, and deducts TDS at your highest marginal slab rate (usually ~31.2% to 35.8% including surcharge and cess). In practice, most US tech employers use a "sell-to-cover" mechanism, automatically selling ~35% of your shares to pay the Indian government.

Stage 2: Sale Date (Capital Gains Tax)

When you sell the remaining shares in the market, any difference between the selling price and the vesting FMV is treated as Capital Gains.

For foreign shares (US tech multinationals like Google, Microsoft, Meta, Nvidia):

• Long Term (> 24 months): Taxed at 12.5% plus 4% cess.
• Short Term (≤ 24 months): Added to income and taxed at your applicable slab rate.