RSUs taxation in India
Can someone throw light on RSUs(US based) taxation in India 1. How are taxes deducted? 2. Does the taxes gets deducted in India as well as the US? 3. What is the right approach to pay these taxes? using shares or by salary if falling in 30% + surcharge bracket. 4. I salary is 85 lakhs and RSUs vesting per year is 50 lakhs..Then what would be taxable income? Inputs are highly appreciated.
1. Usually company will deduct at source. This will show up in your 26AS as TDS
2. US and India have DTAA Double Tax Avoidance Agreement. It will be deducted only once.
3. You generally have two options -
A. exercise option and sell the shares
B. exercise option and hold the shares
In both, option A and option B, taxes need to be paid. If you choose option A, you will get the cash after all deductions like tax and transaction fee.
If you choose option B, you will need to pay tax by two methods - sell enough shares to cover for the tax (company facilitated) or pay the tax by yourself.
People sometime go for option B if they want to hold the Shares for a year or more for LTCG gains which is taxed at a lower rate than income tax.
https://cleartax.in/s/rsu-restricted-stock-unit
Usually the company will sell some units to cover the income tax on vesting for the rest. (Same slab as your taxable income, so some 30+surcharge%) This means instead of getting 100 shares, you get some 68 #pain.
Capital gains you'll need to pay when you sell those. Different rate for this, and will depend on where you sell those (US exchange or India subsidiary)
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