ESPP and RSU tax calculation Funda (NYSE company stock for Indian employee)

My company has scheme ESPP where I pay monthly 10% of my sal for ESPP (employee stock option) and company converts my INR into dollar and buys stock on every 6 months based upon discount 15% buy price . Here we have etrade software as broker where stocks are purchased/sold. Etrade does sell to cover option. Etrade has its own FMV on date of sale. But my company doesnot calculate FMV of etrade, it has its own average FMV being calculated. Is it same across company ?

I sold stocks more than FMV of etrade. Do I still need to pay tax or DTAA applicable ?

e.g. purchase price 10$

on 14/01/2021 purchased 10 stocks x 10$ = 100$ ( my salary accumulated amount converted INR to $)

on 15/01/2021 FMV was 12$ which was considered by etrade during sell to cover

on 15/01/2021 etrade sold 12$- 10$ = 2$ as gain x 10 = 20$ as gain so sold 1 stocks sell to cover

rest 8 stocks remained with me.

my company calculated via third party own average stock value FMV as 11$ and reported in 26AS as 11$ - 10$= 1$ x 10 = 10$ as gain amount into 26AS and deducted tax on 10$ gain amount & by received 10$ from etrade and submitted 3$ to 26AS india govt and rest 7$ returned to me.

now I sold at 14/10/2021 at 8 stocks x 20$ = 160$ sale price

Still do I need to pay tax or not ? Should I consider etrade FMV or company FMV?

Great question! ESPP and RSU tax treatment for Indian employees of a US-listed company (like one on NYSE) can be tricky because of cross-border aspects and valuation differences.

Here’s a clear breakdown based on your scenario:

1. Understanding Tax on ESPP:

At Purchase (Taxable perquisite):
When you purchase shares under ESPP at a discount, the difference between the FMV on purchase date and the purchase price (discount) is treated as perquisite income and taxed as salary income in India.
At Sale (Capital Gains Tax):
When you sell the shares later, the difference between the sale price and the FMV on purchase date (which is your cost basis for capital gains) is considered capital gain (short-term or long-term depending on holding period).

2. Which FMV to consider for Perquisite Income?

The correct FMV for determining perquisite income is the Fair Market Value on the date of purchase (or the date shares are allotted).
Your company’s FMV calculation (average FMV from third party) is used for income reporting and tax deduction at source. Although this might differ from E*Trade's FMV, the company's valuation is generally what HR or payroll relies on.
The difference in FMV reported to Income Tax (26AS) is what your employer has reported and deducted tax on.

3. **What about the E*Trade FMV?**

E*Trade FMV is used for brokerage/selling purposes, but for Indian tax reporting, the company’s FMV (the one reported in Form 16 and Form 26AS) is the basis for perquisite income and TDS.
Even if E*Trade shows a different FMV, your tax liability in India depends on what your employer reports and what you show in your ITR.

4. Capital Gains Calculation at Sale:

Cost of Acquisition for Capital Gains = FMV on purchase date (used for perquisite income)
So in your case:
Cost basis = $11 (company’s FMV) x 10 shares = $110 (for tax reporting purpose)
You sold 8 shares at $20 = $160 sale proceeds
Capital Gain = Sale Price - Cost Basis for those 8 shares
= (8 x 20) - (8 x 11) = 160 - 88 = $72
This $72 is taxable as capital gains in India (short-term if holding period < 24 months, long-term otherwise).

5. **Do you pay tax again on the difference between company FMV and E*Trade FMV?**

No. For Indian tax purposes, you report income and pay tax based on the FMV used by your company (the amount reported in 26AS).
Any discrepancy between E*Trade FMV and company FMV is not taxable twice. The capital gain is computed from the cost basis already reported and taxed as salary income.

6. What about DTAA and foreign tax credits?

If you have paid any taxes in the US (e.g., withholding on sale), you can claim Foreign Tax Credit (FTC) in India under the DTAA between India and the US.
Report your foreign income and taxes paid in your Indian ITR to claim credit and avoid double taxation.

Summary for your example:

Event	Calculation / Basis	Tax treatment
Purchase on 14/01/21	FMV = $11, Purchase Price = $10	Perquisite income = $1 x 10 shares = $10 (taxed as salary, TDS done)
Sell on 15/01/21	Sell to cover based on E*Trade FMV $12	Tax deducted on gain ($2 x 10) by broker
Sell on 14/10/21	Sale Price = $20, Cost basis = $11	Capital gain = ($20-$11) x 8 = $72 taxable as capital gains
Which FMV to use?	Use company FMV ($11) for tax	Use same FMV to avoid double taxation

Action points for you:

Use the company’s FMV for all tax reporting in India, not the E*Trade FMV.
Declare the perquisite income as reported in Form 26AS.
Compute capital gains using company FMV as cost basis.
If taxes were paid abroad, claim foreign tax credit under DTAA in Indian return.
Keep all documents: salary slips, Form 26AS, transaction statements from E*Trade for reconciliation.