When RSUs are credited to your brokerage account, it barely feels like anything happened. There’s no cash payout, and the shares just sit there under your name until you decide what to do next.
But from a tax standpoint, this moment matters. Indian tax rules don’t wait for you to sell the shares or bring the money back to India. Just when receiving them, i.e. when they are vested, is a tax event itself. Later, if you sell them, that’s a second tax event.
Since these shares are priced in dollars, the Indian tax system thinks in rupees. And once foreign exchange comes into the picture, that’s when you have to follow a few specific tax and exchange rate rules to work out your capital gains when you sell.
Are foreign share gains taxable in India?
Yes, if you’re an Indian resident. Indian tax law taxes residents on their global income. That means income earned in India and outside India, which includes your salary, interest, dividends, and yes, capital gains earned in India and from foreign shares.
Also, most people think that if they don’t bring the money back to India, it won’t be taxable. And this is where they make a mistake. The moment you sell your foreign shares, a tax event is triggered - even if the money stays in your foreign brokerage account or you don’t repatriate the funds to India.
How are RSUs taxed?
To understand how RSUs are taxed, it helps to think of them as having two separate lives, as RSUs first behave like salary, and only later like investments. They are taxed when:
1) Taxed at the time of vesting
The moment your RSUs vest and the shares are credited to your account, their value is treated just like a cash bonus. This is called a perquisite, and it gets added to your salary income.
- How it’s taxed: At your applicable income tax slab.
- How tax is paid: Your company usually handles this by “selling to cover” arrangement by selling a portion of your shares immediately to pay the TDS, and you get the remaining units.
At this point, you own the shares, and the rupee value used here becomes your cost of acquisition.
2) Taxed at the time of selling the shares
Once the shares are in your account, they behave like any other foreign investment. Any price movement after vesting is taxed as capital gains when you sell them.
- If held for more than 24 months: The gains are treated as long-term and taxed at 12.5%
- If sold within 24 months: The gains are short-term and taxed at your slab rate.
This stage is where holding period, exchange rates, and capital gains calculations come into play.
What if tax is already paid abroad?
Just like non-residents investing in India are taxed in India, Indians investing abroad might face taxation in the foreign country, too. You might wonder why you have to pay taxes twice, right?
Well, most governments, too, agree that taxing income twice isn’t fair.
India has Double Taxation Avoidance Agreements (DTAA) with many countries. These agreements ensure that:
- You are not taxed twice on the same income.
- You might either be exempted from tax in India or receive a tax credit that you can use to pay your taxes here.
To figure out which one applies to you, it depends on the specific DTAA that India has with that country. If you want a deeper understanding, we have a detailed thread on: What is Double Taxation Avoidance Agreement (DTAA) | How to claim DTAA tax benefits on foreign income?
Which exchange rate should you use?
This is where most people get confused as they follow the rates on Google, the bank’s app or the rate shown by the brokerage platform. Instead, Indian tax rules have a very specific rate.
For capital gains, you must use the SBI Telegraphic Transfer Buying Rate (TTBR). And no, not from the day you sold the shares. As per Rule 115, you must use the TTBR of the last day of the month preceding the month in which the shares were sold.
So, for example, if you sold shares on July 15, 2025, you would use the exchange rate of SBI TTBR as of June 30, 2025.
Where to find the forex rates?
The exchange rate used for tax calculations has to come from an official source.
- SBI’s official website: They publish a daily forex rate sheet.
- Income Tax Portal: Sometimes referenced, but the SBI sheet is the primary source.
- Reliable third-party archives: Useful for older historical rates, since SBI doesn’t always keep a long history public.
How to calculate capital gains on foreign shares?
Let’s say you sold some US shares in August 2025.
| Action | Date | USD value | Specified forex date | SBI TTBR | INR value |
|---|---|---|---|---|---|
| Purchase | June 2023 | $1,000 | May 31, 2023 | ₹82 | ₹82,000 |
| Sale | Aug 2025 | $1,500 | July 31, 2025 | ₹85 | ₹1,27,500 |
The calculation involves two conversions. Here’s how.
Step 1: Convert the purchase value
At first, use the SBI TTBR of the last day of the month before you bought the shares.
So, it would be: Purchase value in USD × Old TTBR
Step 2: Convert the sale value
Now, use the SBI TTBR of the last day of the month before you sold the shares.
Which will be: Sale value in USD × New TTBR
Step 3: Calculate capital gain/loss in INR
Sale value in INR - Purchase value in INR
Since the holding period is 26 months, it’s a long-term capital gain. And the gross capital gain will be ₹1,27,500 - ₹82,000 = ₹45,500
So, the tax payable @12.5% will be ₹45,500 × 12.5% = ₹5,688 (plus 4% cess)
If you sell at a loss in dollars but the rupee has depreciated significantly, you might still end up with a taxable gain in INR! Always calculate gains in rupees first.
If you sell at a loss in dollars but the rupee has depreciated significantly, you might still end up with a taxable gain in INR! Always calculate gains in rupees first.
Oh, and one more thing: when you file your ITR, do not forget to disclose your foreign assets separately. The ITD wants to know about all your global assets. We also have a detailed guide on Schedule FA & FSI: How to declare foreign assets and income in the ITR.