ESOP RSU Tax Filing — Perquisite, Capital Gains & Foreign Shares
ESOP RSU tax filing means reporting two separate taxable events: the perquisite when you exercise or vest, and the capital gain when you sell. If the shares are foreign, Schedule FA and foreign tax credit come in too. We prepare the workings and file the right ITR.
What it is
Nothing is taxed when ESOPs or RSUs are granted. Tax comes later, at two points. First, when you exercise the option or the RSU vests, the difference between the fair market value (FMV) and what you paid is a perquisite, taxed as salary at your slab rate. Second, when you sell, the gain over FMV at exercise is a capital gain.
The perquisite falls under Section 17(2)(vi) of the Income-tax Act, 1961, and your employer deducts TDS on it under Section 192. You report the capital gain in Schedule CG of ITR-2 or ITR-3. If the shares are in a foreign parent, you also report them in Schedule FA, and any foreign tax withheld on dividends or sales goes through Form 67 and Schedule FSI/TR.
Who it applies to
Employees of Indian companies with ESOPs
Say you exercised options in a Gurugram software company two years ago and sold some shares this year. Your Form 16 shows the perquisite, but the sale still has to be reported.
Staff of global companies with RSUs
You hold RSUs of a foreign parent, and some shares were sold on vesting to cover tax. Here the perquisite, the foreign holding and the foreign withholding all need reporting.
Founders and early startup employees
Employees of eligible DPIIT-recognised startups may defer the perquisite tax, so the timing of tax differs. We check whether the deferral applies to you.
Why it matters
You avoid double tax on the same gain
The FMV taxed as perquisite becomes your cost of acquisition. If the exercise price is used instead, the same appreciation gets taxed twice.
Foreign holdings must be disclosed
Resident and ordinarily resident individuals must disclose foreign shares in Schedule FA, even for a single day of holding. Non-disclosure can attract a ₹10 lakh penalty under the Black Money Act, whatever the tax.
You pick the right form
ITR-1 cannot handle capital gains on shares or foreign assets. ITR-2, or ITR-3 if you also have business income, is the right form. A wrong form can bring a defect notice under Section 139(9).
Documents required
From your employer
- Form 16 and salary slips
- ESOP or RSU grant, vesting and exercise statements
- Valuation report for unlisted shares, where applicable
From your broker or platform
- Sale confirmations and capital gains statements
- Dividend statements and withholding records, such as Form 1042-S
- Foreign account statements for the calendar year
From you
- PAN, Aadhaar and bank details
- Tax Residency Certificate, if you claim a treaty rate
- Last year’s return and any foreign tax return
How it works
Gather grant, exercise and sale records
We collect Form 16, equity statements and broker reports. Each exercise or vest is matched to its sale lot.
Work out the perquisite and cost
FMV for listed shares is the average of the opening and closing price on the exercise date. For unlisted shares, a SEBI-registered Category I merchant banker values them. That FMV becomes your cost of acquisition.
Compute gains and the foreign tax credit
We split gains into short and long term and convert foreign amounts at the SBI telegraphic transfer buying rate. Then we work out the credit for foreign tax withheld.
File the return, Schedule FA and Form 67
We file ITR-2 or ITR-3 with Schedules CG, FA and FSI/TR, file Form 67 for the credit, and help you e-verify.
Timelines
AY 2026-27 returns
The 31 July 2026 date for non-audit individuals has passed. You can still file a belated return until 31 December 2026, with a late fee under Section 234F.
Revised return
If you find a missed perquisite or sale, a revised return can be filed up to 31 March 2027.
Form 67 for foreign tax
For AY 2026-27, Form 67 can be filed on or before 31 March 2027, the end of the assessment year.
What happens if you miss it
Late fee and interest
Section 234F charges ₹1,000 if your income is up to ₹5 lakh and ₹5,000 otherwise on a belated return, with interest under Section 234A on unpaid tax.
Black Money Act penalty
A foreign holding left out of Schedule FA can attract a ₹10 lakh penalty, even if no tax is due on it.
Notices on mismatches
The department cross-checks perquisite, sale and foreign data against your Form 26AS and AIS. A mismatch can bring a notice. See our help with income tax notice replies.
Frequently asked questions
How is an ESOP taxed in India?
An ESOP is taxed twice. At exercise, the gap between FMV and the exercise price is a perquisite taxed as salary at your slab rate, with TDS under Section 192. On sale, the gain over FMV at exercise is a capital gain. Listed shares held over 12 months pay 12.5% above ₹1.25 lakh of gains. We compute both stages in one file.
Are RSUs taxed the same way as ESOPs?
Yes, in structure. For RSUs the perquisite arises on vesting, equal to the FMV on that day, since you pay nothing. The sale then gives capital gains over that value. Foreign RSUs add reporting in Schedule FA and foreign tax credit. We handle both the Indian and the foreign parts, so nothing is missed.
What is the holding period for foreign shares?
Foreign shares are unlisted in India, so they are long term only after 24 months. Long-term gains are taxed at 12.5% without indexation, and shorter holdings are taxed at your slab rate. The holding period runs from the exercise or vest date. We confirm the dates against your broker statements, so the right rate is applied.
How is the FMV decided for unlisted shares?
For unlisted shares, a SEBI-registered Category I merchant banker values the shares, as on the exercise date or within 180 days before it. For listed shares, it is the average of the opening and closing price on the exercise date. We use your employer’s valuation and check it. Your cost for capital gains then follows that FMV.
Do I have to report foreign shares in Schedule FA?
Yes, if you are a resident and ordinarily resident. You must disclose the holding even if you held a single share for a single day, on a calendar-year basis. Non-disclosure can attract a ₹10 lakh penalty under the Black Money Act. We prepare Schedule FA from your statements, so the disclosure is complete.
Can I claim credit for tax withheld abroad?
Yes. US dividends, for example, carry withholding of up to 25% under the India-US treaty when a valid Form W-8BEN is on file. You claim the credit through Form 67 and Schedule FSI/TR, capped at the lower of foreign tax and Indian tax on that income. We prepare both, so the credit stays consistent.
Which ITR form should I use?
Use ITR-2 if you have salary, capital gains and foreign assets but no business income. Use ITR-3 if you also have business or professional income. ITR-1 is not allowed with capital gains on shares or foreign assets. We select the form and fill every schedule, which saves you a defect notice later.
Can startup employees defer ESOP tax?
Employees of eligible DPIIT-recognised startups can defer the perquisite tax. The tax falls due at the earliest of 48 months from the end of the assessment year, sale of the shares, or end of employment. Eligibility depends on the startup’s certification and turnover. We check your employer’s status before you rely on the deferral.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
For ESOP RSU tax filing, send your equity statements and last return, and we will work out what to report and what you can claim.