RSU FMV at the time of vesting

For RSUs of a foreign company (like one listed on NASDAQ), the taxation and valuation process in India is generally straightforward and does not typically require a merchant banker certificate for individual employees.

1. Determining Fair Market Value (FMV)

For publicly traded shares like those on NASDAQ, the FMV on the date of vesting is typically the closing price of the stock on the stock exchange on the vesting date.

• Methodology: Since the shares are listed on a public exchange, the market price is readily available and considered the FMV.

• Currency Conversion: As per Rule 26 of the Income-tax Rules, 1962, you must convert the FMV into Indian Rupees (INR) using the SBI Telegraphic Transfer (TT) Buying Rate on the date of vesting.

• Merchant Banker Certificate: You generally do not need a merchant banker certificate. Merchant banker valuations are typically required for unlisted shares or specific corporate compliance scenarios (like "Angel Tax" or FEMA compliance for private companies), not for valuing publicly listed foreign stocks for an individual's salary tax reporting.

2. Tax Implications

RSUs are taxed in two distinct stages in India:

• At Vesting (Salary Income): The FMV on the vesting date is treated as a perquisite and added to your "Income from Salary." It is taxed at your applicable income tax slab rate. Your employer usually withholds tax (TDS) at this stage (often via "sell-to-cover," where they sell a portion of your vested shares to pay the tax).

• At Sale (Capital Gains): When you sell the shares, the difference between the sale price and the FMV (which was already taxed as salary) is treated as capital gains.

  • Holding Period: For foreign shares, the holding period for Long-Term Capital Gains (LTCG) is more than 24 months.

  • Tax Rate: LTCG on foreign shares is currently taxed at 12.5% (without indexation). Short-term gains (if held for 24 months or less) are taxed at your applicable slab rate.

3. Recommended Steps

• Check your Payslip/Form 16: Your employer is responsible for reporting the perquisite value and deducting TDS. You should verify that the income reported in your Form 16 matches the value provided in your equity portal statement.

• Schedule FA: As a resident of India, you are required to disclose these foreign assets in Schedule FA of your Income Tax Return (ITR), regardless of whether you have sold the shares.

• Foreign Tax Credit: If your employer deducted tax in the US, you may be able to claim a Foreign Tax Credit (FTC) by filing Form 67 to avoid double taxation.

Summary:

For NASDAQ-listed RSUs, you do not need a merchant banker certificate; the FMV is determined by the stock's closing price on the vesting date, converted to INR using the SBI TT Buying Rate. These RSUs are taxed as salary (perquisite) at vesting and as capital gains when sold. Ensure you disclose these holdings in Schedule FA of your ITR.