How to evaluate an RSU offer as an Indian employee: a practical guide

An RSU offer looks simple: ₹40 lakh in shares over four years. But the number on the offer letter is not the number that actually shows up in your bank account.

The gap between the stated grant value and your actual after-tax equity income depends on at least six factors: vesting schedule, cliff, current vs assumed stock price, tax treatment, refresh policy, and what happens if the company is acquired. Most of these are negotiable or at least worth understanding before you sign.

Here's how to read an RSU offer so you know what you're actually being offered.

What the offer letter actually says (and what it means)

RSU offers are typically stated as one of three things:

1. Dollar or rupee value of shares — "RSU grant of $100,000" or "₹40 lakh in RSUs"
2. Number of shares — "10,000 RSUs"
3. Both — "10,000 RSUs with an approximate value of $100,000 at current price"

If you're given shares only, you need the current stock price to get the grant value. If you're given a value, ask what stock price was used to calculate it — grants are typically calculated at a 30-day or 90-day volume-weighted average price, which may differ meaningfully from the current trading price.

The grant value is the starting point, not the ending point. The actual value you realise depends on:

• How the stock price moves over the vesting period
• How much tax you pay when shares vest
• Whether you sell immediately or hold further

The vesting schedule: more important than the headline number

The headline grant value means little without the vesting schedule. Two offers with identical headline values can be very different in structure:

Standard 4-year monthly vesting with 1-year cliff:

• Month 12: 25% vests (the cliff)
• Months 13–48: remaining 75% vests at 1/36 per month

Back-loaded annual vesting (common at some companies):

• Year 1: 10% vests
• Year 2: 20% vests
• Year 3: 30% vests
• Year 4: 40% vests

At Year 2, these two schedules look very different: the first has given you ~37% of your grant; the second has given you only 30%. Back-loaded vesting keeps employees locked in longer by front-loading the most valuable unvested equity into later years.

Monthly vs quarterly vs annual vesting:

Monthly vesting gives you 12 vesting events per year — each with a perquisite tax event. Quarterly is 4 events. Annual is 1. More frequent vesting creates more tax events but also more opportunities to sell-to-cover and reduces the lot-tracking complexity. For Indian tax planning (tracking 24-month LTCG thresholds per lot), quarterly or annual vesting is simpler.

The cliff: your single most important negotiating point

A 1-year cliff is standard in US tech. But the cliff has a large impact on your expected value if you're uncertain about your tenure or if you're evaluating offers from a position of moderate job security.

Example: leaving at month 11 vs month 13

On a ₹40 lakh / 4-year grant with a 1-year cliff:

• Leave at month 11: ₹0 in vested equity
• Leave at month 13: ₹10 lakh (25%) vested at month 12 + 1 more month = ~₹10.5 lakh

The cliff creates a binary outcome around the 12-month mark. If you're the kind of person who might change jobs in the first year (or if the role is a stretch where performance is uncertain), the cliff is a meaningful risk.

What to ask: Some companies will negotiate a shorter cliff (6 months instead of 12), or will count time from an earlier start date if you're joining from another role within the same company. Worth asking directly.

The stock price assumption and valuation risk

Your grant is stated at a specific stock price. The shares you actually receive are valued at the market price on each vest date — which may be higher or lower.

Example:

• Offer: 5,000 RSUs at ₹800/share = ₹40 lakh grant
• Stock at vest date (Year 1): ₹600/share
• Actual vested value (25% = 1,250 shares): ₹7.5 lakh — not ₹10 lakh

Stock price risk works both ways. Some offers from companies with recently elevated stock prices are, in practice, worth significantly less than the headline suggests when the stock normalises.

What to look at: The stock's 2-year chart, the price-to-earnings ratio versus peers, and any one-time events that may have temporarily inflated the price before your offer date.

Tax at vest: the most misunderstood part

When RSUs vest, the vested value is taxable as a perquisite under salary income in India — not as capital gains.

Event	Tax treatment
Shares vest	Perquisite = FMV at vest × SBI TTBR; taxed at slab rate as salary
Sell immediately after vest	Capital gain = 0 (sale price ≈ FMV at vest); small STCG if any price movement
Sell 24+ months after vest	LTCG = 12.5% on gain above FMV-at-vest cost basis

The effective tax rate at vest for most RSU holders: 30%+ (including surcharge and cess = ~34.3% for income above ₹50 lakh)

On a ₹10 lakh vesting tranche, you pay approximately ₹3.4 lakh in tax at vest. Your net equity received is ~₹6.6 lakh in shares.

Many employees, especially those new to RSUs, underestimate this. "I got ₹40 lakh in RSUs over 4 years" actually means ₹26–28 lakh in after-tax equity over 4 years, before any stock price movement.

Sell-to-cover: how the tax gets paid

Most large US multinationals use a sell-to-cover mechanism: on the vest date, the company automatically sells enough shares to cover the estimated tax liability and remits the tax on your behalf. You receive the remaining shares (net of sold shares) in your brokerage account.

This is the cleaner mechanism — you don't need to find cash to pay the perquisite tax separately. The perquisite shows up in your Form 16, and the TDS deducted appears in your Form 26AS/AIS.

Important: If your employer does NOT do sell-to-cover (some smaller companies or pre-IPO companies), you need to have liquid cash to pay the perquisite tax at vest — even if you're not selling shares. Clarify this upfront.

After-tax equity income: the number to compare across offers

The right way to compare two RSU offers is the expected after-tax equity income per year, not the headline grant.

Offer A: ₹40 lakh / 4 years at Company X

• Annual vest: ₹10 lakh
• Tax at vest: ~₹3.4 lakh
• After-tax equity per year: ~₹6.6 lakh

Offer B: ₹32 lakh / 4 years at Company Y (with annual refresh grant of ₹8 lakh)

• Year 1 annual vest: ₹8 lakh + ₹0 refresh = ₹8 lakh
• Year 2 annual vest: ₹8 lakh + ₹8 lakh refresh (from Year 1 grant) = increases
• By Year 4, the refresh makes total equity income materially higher

The refresh grant is not always in the offer letter but is one of the most important variables in total compensation at Year 3 and beyond.

Refresh grants: the equity that keeps giving (or doesn't)

An initial 4-year grant covers years 1–4. What happens at Year 5? At most large US tech companies, you receive an annual refresh grant to maintain your unvested equity balance. At companies with no refresh policy, Year 5 equity income drops to zero unless you negotiate a new grant.

Companies with strong refresh policies (e.g., Google, Meta, Amazon, Apple, Microsoft):

• Annual refreshes tied to performance rating
• Total unvested equity typically maintained at 1–2× annual salary
• Strong retention incentive in years 3–6

Companies with weak or no refresh policies:

• Year 5+ you're working on base salary only (plus any remaining unvested)
• Common in smaller companies, Indian subsidiaries of mid-size US firms

What to ask: "What is the typical annual refresh grant for this role level? How is it tied to performance rating?"

Numeric benchmarks vary by company, but if the answer is "it depends entirely on manager discretion" with no clear policy, that's useful signal.

Double-trigger acceleration and acquisition scenarios

Many RSU agreements include acceleration clauses — provisions that cause unvested RSUs to vest early under certain conditions.

The standard is double trigger acceleration: both a change of control (acquisition) AND a qualifying termination (layoff or significant role change) must occur. In that scenario, some or all unvested RSUs accelerate to vest.

Single trigger acceleration (just the acquisition event) is rare but favourable to employees.

Why it matters for Indian employees: If the company is acquired and your role is eliminated, acceleration provisions determine how much equity you walk away with. Without acceleration, the acquirer may cancel unvested RSUs or convert them on unfavourable terms.

What to ask: "What are the acceleration provisions in the RSU agreement for acquisition scenarios?"

The Indian-specific questions to ask

Beyond standard RSU evaluation questions, Indian employees at US multinationals should specifically ask:

1. Does the company do sell-to-cover for Indian employees? Confirms whether your perquisite tax is handled automatically or you need to manage cash for tax payments.

2. Are RSUs settled in USD in a US brokerage account? If shares are deposited in a US brokerage account, you're subject to LRS regulations, Schedule FA reporting, and US estate tax considerations. If shares are converted to INR and deposited in your Indian salary account, different rules apply.

3. What trading window policy applies to Indian employees? Employees with access to material non-public information are subject to trading windows. Understand how many open windows you'll typically get per year and whether RSU vestings during blackout periods are handled differently.

4. Is there a mandatory holding period post-vest? Some companies require Indian employees to hold vested shares for a specified period. Understand this before planning your diversification strategy.

5. What is the RSU documentation for Indian compliance? Confirm that the company provides documents needed for Indian compliance: Form 16 with RSU perquisite, the USD FMV at each vest date, and the SBI TTBR rate used. These are required for accurate ITR filing.

Comparing RSU offers to pure cash raises

The right comparison for an RSU offer is: what would this grant be worth if given as a cash salary increment instead?

Illustrative comparison:

• RSU offer: ₹10 lakh/year additional equity
• After-tax at vest: ₹6.6 lakh/year
• If invested in a broad index fund at 12% over 4 years: grows to ~₹10 lakh

Versus:

• Cash raise: ₹10 lakh/year
• After-tax (30% slab): ₹7 lakh/year
• Can be invested immediately without waiting for vest

RSUs have a concentration risk premium (you're locked into one stock) and a vesting risk (you don't receive them if you leave before cliff). A ₹10 lakh RSU is not the same as ₹10 lakh cash even before considering tax.

Rule of thumb for comparison: An RSU offer needs to be 1.3–1.5× the cash equivalent to compensate for vesting risk and concentration — especially at companies with meaningful stock price volatility.

What to negotiate

RSU offers have more negotiation room than most candidates realise. Common asks:

Ask	Feasibility
Higher grant size	High — the most obvious ask
Shorter cliff (6 months vs 12)	Moderate — often negotiable at senior levels
Sign-on RSU grant to cover cliff risk	High — common when joining from a company with unvested equity
Monthly vesting instead of quarterly/annual	Low — usually company-wide policy
Front-loaded vesting (vs back-loaded)	Low — usually company-wide policy
Clarity on refresh grant quantum	Not negotiable as a number, but reasonable to ask for policy details

If you're leaving unvested equity at your current employer, negotiate a sign-on RSU grant to replace it. Most companies will consider this — it's the cleanest way to make you whole on the cliff risk of switching.

A worked example: reading a real offer

Offer: ₹48 lakh in RSUs over 4 years, 1-year cliff, quarterly vesting thereafter, at Company X (NASDAQ-listed, current price ₹1,200/share)

Step 1: Convert to shares ₹48 lakh ÷ ₹1,200 = 4,000 RSUs

Step 2: Vesting schedule

• Month 12: 1,000 shares vest (cliff)
• Months 13–48: 83–84 shares vest each quarter (×12 quarters)

Step 3: Perquisite tax at first vest (Month 12)

• FMV at vest: say stock is at ₹1,350
• Perquisite value: 1,000 × ₹1,350 = ₹13.5 lakh
• Tax at ~34.3%: ₹4.6 lakh
• After sell-to-cover, shares retained: ~660 (₹8.9 lakh of net equity)

Step 4: What you actually receive Year 1

• Net equity after tax: ₹8.9 lakh in shares of Company X

Step 5: Concentration check

• If your total investable net worth is ₹60 lakh, Company X stock after Year 1 vest = 15% of net worth
• Borderline acceptable; Year 2 will push it above 20% if you hold
• Diversification plan needed at or after Year 1 cliff

Step 6: Compare to offer headline ₹48 lakh / 4 years = ₹12 lakh/year stated. After-tax: ~₹8–9 lakh/year in net equity (at current stock price). This is the realistic annual equity income.

Summary

Factor	What to look for
Cliff	1-year standard; negotiate shorter if possible
Vesting frequency	Monthly/quarterly better for cashflow planning
Stock price at grant	Compare to 1-year range; check if grant was timed at peak
Tax at vest	~30–34% of perquisite; confirm sell-to-cover
Refresh policy	Critical for Years 3+; ask for specifics
Acceleration clauses	Double trigger is standard; know the terms
Sell-to-cover	Confirm for Indian employees
Sign-on grant	Negotiate if leaving unvested equity elsewhere

The headline grant number is the start of the conversation, not the end. Understanding the after-tax equity income, the concentration risk you're accumulating, and the refresh policy over a 4–6 year horizon gives you the full picture.

For what to do with vested RSU shares once you have them, see the RSU diversification guide for Indian employees. For the complete RSU tax treatment in India, see the complete RSU guide for Indians at US multinationals.