India
Guide to stock options and RSU taxation in India. Covers perquisite tax, capital gains, TDS, and rules for employees of Indian and foreign companies.
India has a large tech workforce, with many employees receiving equity from both Indian and global companies. Equity compensation is taxed in two stages: as salary income (perquisite) at vesting/exercise, and as capital gains when you sell.
Overview of Indian Tax System
India uses a progressive tax system with slab rates. For FY 2025-26:
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to ₹3,00,000 | 0% |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Surcharge and cess apply at higher incomes.
ESOPs (Stock Options)
Taxation at Exercise
The difference between fair market value (FMV) at exercise and the exercise price is taxed as perquisite (salary income) under Section 17(2)(vi). TDS is deducted under Section 192.
| Event | Tax Treatment |
|---|---|
| Grant | No tax |
| Exercise | Perquisite = (FMV − exercise price) × shares |
| Sale | Capital gains on appreciation since exercise |
Capital Gains at Sale
| Share Type | Holding Period | Tax Rate |
|---|---|---|
| Listed | >12 months | 10% (LTCG, gains above ₹1 lakh) |
| Listed | ≤12 months | 15% (STCG) |
| Unlisted | >24 months | 20% with indexation |
| Unlisted | ≤24 months | Slab rate |
RSUs
Taxation at Vesting
RSUs are taxed at vesting on the full FMV (since they're granted free). The amount is perquisite income. TDS applies under Section 192.
| Event | Tax Treatment |
|---|---|
| Grant | No tax |
| Vesting | Perquisite = FMV × shares |
| Sale | Capital gains on appreciation since vesting |
Foreign Employer Equity
For RSUs/ESOPs from foreign companies (e.g., US tech companies):
- Fully taxable in India when vesting/exercise occurs
- Report in Schedule FA of your ITR
- Foreign tax credit available under Section 90/91 for tax paid abroad
- NRIs: taxed only if services were rendered in India
Key Planning Points
- TDS: Employer withholds at vesting/exercise. Ensure it matches your slab.
- Documentation: Keep grant letters, vesting statements, and sale confirmations.
- Foreign equity: Report in ITR even if employer is overseas.
- Double taxation: Use foreign tax credit if you paid tax in another country.
Sources
- Income Tax Act, 1961 (Section 17, 192)
- CBDT circulars
- Income Tax India (incometaxindia.gov.in)
Disclaimer: This guide is for educational purposes. Indian tax law is complex. Consult a qualified Indian tax advisor before making decisions.
Last Updated: March 2026 | Research Team: VestingStrategy
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