Two tax events, three residency outcomes, one window where the math actually rewards you. We've filed RSU returns for Google, Microsoft, Amazon, Meta, Apple and NVIDIA engineers across the US, UK and Singapore — and the same Section 17(2)(vi) and Section 112 rules apply to every one of them.
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The window worth knowing about
RNOR · 1-2 years
Post-return period under Section 6(6). Foreign capital gains stay outside Section 5(1)(c).
Sell in RNOR
Gain on US RSU shares isn't taxed in India. ROR starts the following year and the rate jumps to 12.5%.
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Per ₹1 Cr of long-term capital gain. The calendar matters more than the company.
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Every RSU question collapses into one of these two events. The tax rule for each is fixed; what changes is your residency status in the year the event happens.
Event 1 — On vest
The FMV on the vest date, minus anything you paid for the units (almost always zero), is salary income under Section 17(2)(vi) of the Income-tax Act. Rule 3(8) tells you how to value it. The US side already withholds tax on this — your W-2 picks it up. India's question is: how much of that vest is for service rendered in India?
Event 2 — On sale
The gap between sale price and the FMV-on-vest (your cost basis) is capital gain. Holding period ≥ 24 months on these foreign unlisted shares is LTCG at 12.5% under Section 112; shorter = STCG at slab rates. The DTAA does NOT exempt this for Indian residents — Article 13 lets India tax under its own domestic law.
Section 5 of the Income-tax Act sets the scope of income taxable in India differently for each residency status. RSUs are the cleanest case to see the difference.
At vest
India can tax only the portion of the vest attributable to days you worked in India during the grant-to-vest window. Pure-US vesting cycle = no India salary tax on the vest.
At sale
Zero India tax on the sale. Foreign-source capital gain to a non-resident is outside Section 5(2). Whatever US tax applies on disposition is your only tax cost.
Schedule FA
No Schedule FA filing obligation. Schedule FA applies only to Resident-Ordinarily-Resident individuals.
At vest
India taxes the portion of vest attributable to Indian service days. Vest income from purely US service days isn't taxable, under the proviso to Section 5(1).
At sale
Zero India tax on the sale, provided the gain isn't from a business controlled in India. RSU sale proceeds qualify — this is the RNOR planning window.
Schedule FA
No Schedule FA filing for RNOR (same exemption as NRI).
At vest
India taxes 100% of the vest FMV under Section 17(2)(vi) read with Rule 3(8). The US side is a credit you claim via Form 67 under Rule 128.
At sale
India taxes the full capital gain. LTCG at 12.5% post Section 112 amendment (Finance (No. 2) Act 2024, w.e.f. 23 July 2024) if held 24+ months. STCG at slab rates.
Schedule FA
Schedule FA mandatory. Every foreign account, every brokerage holding, every restricted unit. Penalty under the Black Money Act (BMA, 2015) for non-disclosure: ₹10 lakh per default plus prosecution exposure.
Section 6(6) defines "Not Ordinarily Resident." You qualify if you've been non-resident in 9 of the previous 10 financial years, OR your stay in India over the previous 7 years is 729 days or less. Most engineers returning from a 5-year-plus US stint hit one of these and stay RNOR for one or two years.
During RNOR, the proviso to Section 5(1) excludes foreign-source income from Indian tax — unless it's from a business controlled in India or a profession set up in India. RSU sale proceeds are passive foreign capital gains. They sit outside that business-controlled-in-India carve-out. Sell during RNOR and India can't tax that gain.
Wait until your status flips to ROR (Resident-Ordinarily- Resident), usually year 2 or 3 post-return, and India taxes the full gain at 12.5% under Section 112. On a $200,000 gain (₹1.7 Cr at ₹85/$) that's ₹21 lakh of avoidable tax.
Most NRIs file one of these wrong, or miss the deadline, and then spend three years undoing it. Here's the canonical list.
Before the due date of your ITR under Section 139(1), per Rule 128(9) as amended by Notification 100/2022.
Statement of foreign tax paid, attached to claim Foreign Tax Credit on the US withholding. Skip it = FTC disallowed.
Year you become Resident-Ordinarily-Resident. Not required while you're NRI or RNOR.
Discloses every foreign asset: vested RSU holdings, ESPP shares, foreign bank accounts, foreign retirement accounts, foreign mutual funds. Black Money Act exposure if missed.
Same return that claims FTC. Required for residents reporting foreign-source income.
Reports the head-wise foreign-source income and the country it came from. Pairs with Schedule TR for the tax-credit math.
Refresh every 3 years, or when your tax residency changes.
Tells your US broker your country of tax residence so dividend withholding follows the US-India DTAA Article 10 rate (25% for individuals; the 15% sub-rate is only for corporate beneficial owners holding ≥10% voting stock).
Filed online with your TRC each year you claim DTAA in India.
Self-declaration prescribed under Rule 21AB that pairs with your foreign Tax Residency Certificate. Required when you ask Indian payers to apply treaty rates instead of Section 195 default. Filing has been e-only since CBDT Notification 03/2022.
Article 16(1) of the India-US DTAA says salary derived by a resident of one country is taxable only in that country unless the employment is exercised in the other country. Translated: your US-vesting RSU is US salary, taxable in the US. The slice for India workdays during the vest cycle is salary earned in India under Section 9(1)(ii) — India gets that slice, US gives you a credit.
India-US DTAA Article 13 doesn't hand exclusive taxing rights to the residence state for sale of corporate shares. Each country taxes per its domestic law. India taxes its residents on worldwide capital gains under Section 5(1). The US doesn't tax non-resident-alien capital gains. So the only India-vs-no-India lever is your residency in the year of sale.
Schedule FA is a Resident-Ordinarily-Resident obligation. NRIs and RNORs don't file it. Filing it unnecessarily triggers cross-verification and questions you didn't need to invite.
Rule 128(9), as amended by CBDT Notification 100/2022 (18 August 2022), now allows Form 67 on or before the end of the assessment year — but plan to file with the ITR by the Section 139(1) due date (currently 31 July for non-audit returns). Late Form 67 = FTC disallowed = double tax on the same RSU vest.
Sell while you're still NRI or RNOR: India can't tax the gain. Sell after you flip to ROR: India taxes the full gain at 12.5% LTCG or slab-rate STCG. On a ₹1 Cr gain that's ₹12.5 lakh of avoidable tax for getting the calendar wrong by one quarter.
ESPP discount is US ordinary income on the disqualifying-disposition rules under IRC Section 423. RSU vest is salary perquisite under Section 17(2)(vi) of the Indian Act. The two events have different cost bases, different holding-period clocks, and different India tax outcomes. Compute them separately.
An expired or missing W-8BEN sends your US broker to the 30% statutory NRA withholding under IRC §1441 instead of the 25% US-India DTAA Article 10 dividend rate. Five years of dividends at the wrong rate adds up — and recovering the overpayment via a US 1040-NR amendment is paperwork most NRIs don't bother with.
Same tax mechanics. Different broker, different India footprint, different equity-program quirks. Pick yours.
What it costs
The starter covers your single-year ITR-2 / ITR-3 with Form 67, Schedule FA (if ROR), Schedule FSI and Schedule TR. The success fee applies only when we recover excess withholding or save tax via the RNOR sell-window planning. No recovery, no fee.
One quarter of the wrong residency year can cost ₹12 lakh.
Talk to a CA before you sell, not after.
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Senior CA who specialises in NRI tax · we deal with the tax officer, you don't
US tech engineers across the NRI cohort and the returning-Indian cohort.
Often happens together
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