📘 Understanding RSU Taxation: What You Need to Know

Receiving Restricted Stock Units (RSUs) as part of your compensation package can be a great financial benefit. However, it's important to understand the tax implications to avoid any surprises.

🔍 What are RSUs?

RSUs are a type of equity compensation that represents a promise to grant a certain number of shares of company stock in the future.
💡 Unlike stock options, RSUs do not require you to purchase the shares.

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💰 Taxation of RSUs in India

In India, RSUs are taxed as perquisites under the Income-tax Act, 1961. Here’s how taxation works:

🏛️ 1. Taxation at the Time of Vesting

📅 When your RSUs vest, the Fair Market Value (FMV) of the shares is considered taxable income.
💰 This amount is added to your salary income and taxed as per your applicable income tax slab.

📈 2. Taxation at the Time of Sale

💵 When you sell the shares, you are required to pay capital gains tax on the profit made from the sale.
✔️ The applicable capital gains tax rate depends on the holding period:

• Short-term capital gains (STCG): If shares are sold within 12 months.
• Long-term capital gains (LTCG): If shares are held for more than 12 months.

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⚖️ Key Tax Considerations

✔️ The FMV of the shares at the time of vesting is considered taxable income.
✔️ The tax rate applicable will depend on your income tax slab.
✔️ You may be required to pay capital gains tax on the profit made from the sale of shares.

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📊 Planning Ahead: Minimize Tax Liabilities

To optimize your tax situation, consider these strategies:

📝 Consult a tax professional to understand your specific tax liabilities.
📅 Plan your RSU vesting & sales strategically to minimize taxes.
📊 Keep track of RSU grants, vesting, and sales for accurate tax reporting.

By understanding RSU taxation, you can make informed financial decisions and optimize your tax strategy! 💼📉