ESOP & RSU Tax Filing in India — FY 2025-26

Two tax events: exercise and sale

Step 1 — Exercise (ESOPs) / Vesting (RSUs): The difference between Fair Market Value (FMV) on the exercise/vesting date and the exercise price (typically ₹0 for RSUs) is treated as a perquisite under salary income. This is taxed at your slab rate and should appear in Form 16. Step 2 — Sale of shares: The difference between the sale price and the FMV at exercise/vesting is capital gains, taxed at STCG (20%) or LTCG (12.5%) rates depending on holding period.

FMV calculation — listed vs unlisted companies

For listed company shares: FMV is the closing market price on the date of exercise on the recognised stock exchange. For unlisted company shares: FMV is determined by a SEBI-registered Merchant Banker or independent valuer. The FMV at exercise becomes your cost of acquisition for future capital gains calculation — not the exercise price you actually paid.

ESOP TDS deferral for DPIIT startups

Employees of DPIIT-registered eligible startups can defer TDS on ESOP perquisites under Section 192(1C). The TDS (and tax payment) is deferred to the earliest of: 48 months from end of the assessment year of allotment, date of sale/transfer of shares, or date the employee leaves the company. This deferral is not available for employees of listed companies.

Foreign RSUs — Schedule FA disclosure

If your RSUs vest in foreign shares (common for MNC employees), the shares are foreign assets and must be disclosed in Schedule FA (Foreign Assets) in ITR-2 for the year of vesting. Failure to disclose foreign assets attracts severe penalties under the Black Money Act. The perquisite value is still taxable as salary in the year of vesting.

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