{"id":90907,"date":"2026-10-26T13:38:20","date_gmt":"2026-10-26T08:08:20","guid":{"rendered":"https:\/\/www.taxaj.com/learn\/esop-rsu-tax-bengaluru-employees\/"},"modified":"2026-10-26T13:38:20","modified_gmt":"2026-10-26T08:08:20","slug":"esop-rsu-tax-bengaluru-employees","status":"publish","type":"post","link":"https:\/\/www.taxaj.com/learn\/esop-rsu-tax-bengaluru-employees\/","title":{"rendered":"ESOP and RSU Tax for Bengaluru Employees (Tax Year 2026-27): Perquisite, Schedule FA, Sell-to-Cover and FAST-DS"},"content":{"rendered":"<p class=\"wp-block-paragraph\"><strong>ESOPs and RSUs are taxed twice. First, when the shares are allotted or vest, the gap between their market value and what you paid is salary, and your employer deducts TDS on it. Then, when you sell, the gain over that market value is a capital gain. If the shares are in a foreign parent, as most RSUs in Bengaluru are, you must also report them in Schedule FA of your return every year. A one-time window to fix past omissions, FAST-DS 2026, is open until 31 December 2026.<\/strong> This guide applies the rules of the Income-tax Act, 2025, in force from 1 April 2026, to the grants Bengaluru employees most often hold.<\/p>\n<h2 class=\"wp-block-heading\">The two tax points in one table<\/h2>\n<figure class=\"wp-block-table\">\n<table>\n<thead>\n<tr>\n<th>Event<\/th>\n<th>How it is taxed<\/th>\n<th>Who pays<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>ESOP exercised and shares allotted<\/td>\n<td>Salary perquisite: market value on the exercise date minus the exercise price<\/td>\n<td>Employer deducts TDS through payroll<\/td>\n<\/tr>\n<tr>\n<td>RSUs vest<\/td>\n<td>Salary perquisite: market value of all vested shares on the vesting date, converted to rupees<\/td>\n<td>Employer deducts TDS; the broker usually sells some shares to fund it<\/td>\n<\/tr>\n<tr>\n<td>Shares sold<\/td>\n<td>Capital gain: sale price minus the market value already taxed as salary<\/td>\n<td>You, in your return<\/td>\n<\/tr>\n<tr>\n<td>Dividends on foreign shares<\/td>\n<td>Income from other sources, with credit for the tax withheld abroad<\/td>\n<td>You, in your return<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<h2 class=\"wp-block-heading\">ESOPs of an Indian company<\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>The charge:<\/strong> section 17(1)(d) of the Income-tax Act, 2025 treats shares allotted free or at a concession under an ESOP as a perquisite. Section 17(4)(h) values it at the fair market value on the date you exercise, minus what you paid. Example: 1,000 options at an exercise price of \u20b950, with shares worth \u20b9450 on the exercise date, give a perquisite of \u20b94,00,000.<\/li>\n<li><strong>Market value:<\/strong> for shares listed in India, the stock-exchange price on the exercise date; for unlisted shares, the value set by a SEBI-registered Category I merchant banker, under the Income-tax Rules, 2026.<\/li>\n<li><strong>TDS:<\/strong> the employer deducts tax on the perquisite with your salary under section 392. If the payroll month cannot absorb the tax, the employer may ask you to pay it in.<\/li>\n<\/ul>\n<h3 class=\"wp-block-heading\">If your employer is an eligible start-up<\/h3>\n<p class=\"wp-block-paragraph\">Employees of an eligible start-up do not pay the tax at allotment. Under section 289(3) of the 2025 Act, the tax falls due within 14 days of the earliest of three dates: the end of 60 months from the end of the tax year of allotment, the day you sell the shares, or the day you leave the company. The old Act allowed 48 months. The employer must itself be an eligible start-up under section 140, which covers companies incorporated before 1 April 2030, with the turnover limit raised from \u20b9100 crore to \u20b9300 crore from 1 April 2026.<\/p>\n<h2 class=\"wp-block-heading\">RSUs of a foreign parent<\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>Vesting is the tax point.<\/strong> The whole value of the shares that vest is salary, converted at the SBI telegraphic transfer buying rate. Nothing is taxed at grant.<\/li>\n<li><strong>Sell-to-cover:<\/strong> brokers such as E*TRADE, Fidelity or Schwab usually sell part of the vested shares to fund the TDS. Those sold shares still count in the perquisite. Because they are sold at about the vesting price, the capital gain or loss on them is small, but it still goes in your return.<\/li>\n<li><strong>Check Form 16 against the broker statement.<\/strong> The perquisite in your Form 16 should equal the number of shares vested times the vesting price times the exchange rate. Differences usually come from a wrong rate or a missed vest, and the department&#8217;s data from abroad will show the true figure.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">When you sell<\/h2>\n<figure class=\"wp-block-table\">\n<table>\n<thead>\n<tr>\n<th>Shares<\/th>\n<th>Long-term after<\/th>\n<th>Long-term rate<\/th>\n<th>Short-term rate<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Listed on an Indian stock exchange<\/td>\n<td>12 months<\/td>\n<td>12.5% above \u20b91.25 lakh a year<\/td>\n<td>20%<\/td>\n<\/tr>\n<tr>\n<td>Foreign shares (for example, US-listed RSUs)<\/td>\n<td>24 months<\/td>\n<td>12.5%, no \u20b91.25 lakh exemption<\/td>\n<td>Your slab rate<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<p class=\"wp-block-paragraph\">Shares listed only abroad count as unlisted in India, because &#8220;listed&#8221; means listed on a recognised stock exchange in India (section 197(6)). The cost is the market value already taxed as salary (section 73), and the holding period runs from the date of allotment or vesting. Selling a US share one day after its second vesting anniversary rather than one day before can move the gain from your slab rate to 12.5%.<\/p>\n<h2 class=\"wp-block-heading\">Schedule FA: the part most people miss<\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>What goes in:<\/strong> every foreign asset you held at any time in the calendar year: vested foreign shares, the foreign brokerage account, and any foreign bank account. Dividends go in the income schedules too.<\/li>\n<li><strong>Calendar year, not financial year.<\/strong> The return for Tax Year 2026-27 reports foreign assets for January to December 2026.<\/li>\n<li><strong>Unvested RSUs:<\/strong> there is no official instruction. Many advisers report granted but unvested units as well, and we discuss this with each client.<\/li>\n<li><strong>The penalty:<\/strong> \u20b910 lakh under sections 42 and 43 of the Black Money Act for not reporting. Since 1 October 2024 there is no penalty where the total value of foreign assets other than immovable property is \u20b920 lakh or less.<\/li>\n<li><strong>The department knows.<\/strong> Foreign brokers report under automatic exchange of information. In November 2025 the CBDT&#8217;s second NUDGE campaign sent emails and texts to taxpayers whose foreign assets did not appear in their returns.<\/li>\n<\/ul>\n<h3 class=\"wp-block-heading\">FAST-DS 2026: the window to fix past years, open until 31 December 2026<\/h3>\n<p class=\"wp-block-paragraph\">The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 was notified on 14 August 2026, after its announcement in the Union Budget. Declarations in Form 1 can be filed until 31 December 2026, valued as at 31 March 2026.<\/p>\n<figure class=\"wp-block-table\">\n<table>\n<thead>\n<tr>\n<th>Situation<\/th>\n<th>Value limit<\/th>\n<th>Amount payable<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Foreign asset or income that was never taxed<\/td>\n<td>Up to \u20b91 crore in total<\/td>\n<td>30% tax plus an additional 100% of that tax<\/td>\n<\/tr>\n<tr>\n<td>Foreign asset that was not reported, though the income was taxed (the usual RSU case: taxed through salary, missing from Schedule FA)<\/td>\n<td>Up to \u20b95 crore in total<\/td>\n<td>Flat \u20b91 lakh<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<p class=\"wp-block-paragraph\">A declaration gives immunity from further tax, penalty and prosecution under the Black Money Act for what it covers. If you have held foreign shares for some years and never filled in Schedule FA, the flat \u20b91 lakh route is usually far cheaper than the \u20b910 lakh a year penalty it replaces. Talk to us before December, because the tax office takes a month to issue its order and payment follows.<\/p>\n<h2 class=\"wp-block-heading\">Dividends and the foreign tax credit<\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>US withholding:<\/strong> 25% on dividends under the India-US tax treaty if your broker holds a W-8BEN form for you; otherwise 30%. Check that the form is on file and renewed.<\/li>\n<li><strong>Claiming the credit:<\/strong> for income of 2025-26, file Form 67 by 31 March 2027 if your return is filed on time. From Tax Year 2026-27 the form is Form 44 under rule 76 of the Income-tax Rules, 2026, due within 12 months of the end of the tax year. Without the form, the credit is denied.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">Checklist for the year<\/h2>\n<ol class=\"wp-block-list\">\n<li>Download the broker&#8217;s annual statement for the calendar year, with every vest, sale and dividend.<\/li>\n<li>Match the vests with the perquisite in Form 16, share by share.<\/li>\n<li>Work out each sale&#8217;s gain from the vesting value, and the holding period from the vesting date.<\/li>\n<li>Fill in Schedule FA for January to December, including the brokerage account.<\/li>\n<li>File the foreign tax credit form for dividend tax withheld abroad.<\/li>\n<li>File by 31 July. If you missed Schedule FA in earlier years, decide on FAST-DS before 31 December 2026.<\/li>\n<\/ol>\n<h2 class=\"wp-block-heading\">Frequently asked questions<\/h2>\n<h3 class=\"wp-block-heading\">Are RSUs taxed at vesting or at sale in India?<\/h3>\n<p class=\"wp-block-paragraph\">Both. The value at vesting is salary, and any rise after vesting is a capital gain when you sell.<\/p>\n<h3 class=\"wp-block-heading\">Do I need to report US RSUs in Schedule FA?<\/h3>\n<p class=\"wp-block-paragraph\">Yes, for every calendar year in which you hold them, along with the brokerage account, even if all the tax was paid through salary.<\/p>\n<h3 class=\"wp-block-heading\">I never reported my RSUs in Schedule FA. What now?<\/h3>\n<p class=\"wp-block-paragraph\">If the income was taxed through salary and the assets are worth up to \u20b95 crore, FAST-DS 2026 lets you regularise them for a flat \u20b91 lakh until 31 December 2026, with immunity under the Black Money Act.<\/p>\n<p class=\"wp-block-paragraph\">TAXAJ&#8217;s Bengaluru office in J.P. Nagar prepares ESOP and RSU returns, Schedule FA and FAST-DS declarations for employees of Bengaluru&#8217;s tech companies and global capability centres. See our <a href=\"https:\/\/www.taxaj.com\/residents-with-foreign-income\" target=\"_blank\" rel=\"noopener\">foreign income return service<\/a>, the <a href=\"https:\/\/www.taxaj.com\/esop-calculator\" target=\"_blank\" rel=\"noopener\">ESOP calculator<\/a>, or talk to our <a href=\"https:\/\/www.taxaj.com\/ca-in-bengaluru\" target=\"_blank\" rel=\"noopener\">Bengaluru team<\/a>.<\/p>\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/wa.me\/918802912345?text=I%20am%20in%20Bengaluru%20and%20need%20help%20with%20ESOP%20or%20RSU%20tax\" target=\"_blank\" rel=\"noopener\">WhatsApp our Bengaluru team<\/a><\/div>\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link wp-element-button\" href=\"tel:+918802812345\">Call 88028 12345<\/a><\/div>\n<\/div>\n<p class=\"has-small-font-size wp-block-paragraph\"><em>Last updated 26 October 2026. Sources: Income-tax Act, 2025, sections 2(101), 17(1)(d), 17(4), 73, 140, 197, 289(3) and 392; Income-tax Rules, 2026, rules 15 and 76; Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, sections 42 and 43, as amended by the Finance (No. 2) Act, 2024; CBDT press release of 27 November 2025 on the second NUDGE initiative; Foreign Assets of Small Taxpayers Disclosure Scheme, 2026, notified 14 August 2026; Notification No. 100\/2022 on Form 67; India-US tax treaty, Article 10. General information only; check your own grant documents before you file.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How ESOPs and foreign RSUs are taxed under the Income-tax Act, 2025: the perquisite at vesting, capital gains on sale, Schedule FA reporting, the foreign tax credit and the FAST-DS 2026 window open until 31 December 2026.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[5],"tags":[],"class_list":["post-90907","post","type-post","status-publish","format-standard","hentry","category-income-tax"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/90907","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=90907"}],"version-history":[{"count":0,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/90907\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=90907"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=90907"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=90907"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}