Layoff + US stocks: the complete tax checklist for Indian residents

A layoff from a US tech company doesn't just complicate your finances — it creates a specific set of tax obligations that are easy to miss. The perquisite on the last vest. Capital gains if you sell. Schedule FA for the foreign brokerage account. Possibly Form 67 if you received dividends.

Miss any one of these and you're looking at a notice.

This is the complete tax checklist.

The tax events that happen at layoff

1. Perquisite income on the last vest

If any RSUs vest on or before your last working day, those shares are treated as perquisite income — taxable as salary, in the financial year of vest.

The perquisite value formula:

Perquisite = (FMV on vest date in USD × SBI TTBR rate on vest date) × number of shares vested

Your employer's payroll team calculates this. The company withholds TDS on the perquisite amount at the time of vest — the shares deposited into your account are post-TDS shares.

What you need to verify:

• The SBI TTBR rate used on each vest date (check RBI's published rates)
• The share count used in the calculation
• That TDS was correctly deducted and will be reflected in Form 16

Why it matters: the perquisite value becomes your cost basis for capital gains when you later sell the shares. An incorrect perquisite calculation = an incorrect cost basis = an incorrect capital gain.

2. Severance package taxation

Severance pay is generally taxable as salary income in India. Whether any part of it qualifies for exemption depends on the nature of the payment and your specific employment terms.

If the severance includes:

• Salary in lieu of notice: fully taxable
• Gratuity: may be exempt up to ₹20 lakh under Section 10(10) if you've completed 5 years of service
• Leave encashment: partially exempt under Section 10(10AA) up to ₹25 lakh for non-government employees

Get the breakup in writing from HR. Different components have different tax treatment.

3. Capital gains when you sell shares

When you sell the vested shares, the gain is:

Capital gain = Sale price (USD × TTBR on sale date) − Perquisite value (cost basis)

The holding period determines the rate:

The holding period starts from the vest date (when the shares actually transferred to you), not the grant date.

Important: there's no concept of "wash sale" rules in India. You can sell a loss position and repurchase the same stock without the loss being disallowed — unlike in the US.

The documents you need

Before filing ITR-2, collect all of these:

From your employer:

• Form 16 — includes salary, perquisite, and TDS for the year
• Equity vest confirmation / RSU release letter
• SBI TTBR rates used for each vest (employer should provide; cross-check with RBI published rates)
• Severance breakup letter

From your US brokerage:

• Annual transaction history / trade confirmations for each sale
• Year-end account statement (for Schedule FA disclosure)
• 1099-DIV if you received any dividends (for Form 67)
• Cost basis report (shows what the broker recorded as your cost basis; may differ from India calculation)

Your own records:

• Vest schedule from the equity platform (all vests for the year with dates and share counts)
• SBI TTBR rates for each vest date and each sale date

Schedule FA: foreign asset disclosure

If you held a foreign brokerage account at any point during the calendar year (January 1–December 31), you must disclose it in Schedule FA of ITR-2.

This obligation continues even if you've sold all shares — you held a foreign asset during that year. It also continues even after the layoff, for every year you still hold shares.

What to disclose in Schedule FA:

• Country and name of the institution (e.g., USA — E*Trade Securities)
• Account number
• Date account opened
• Maximum value held during the calendar year (in USD, then convert at the year-end rate)
• Closing value as of December 31
• Amount credited and debited during the year
• Income earned (dividends, interest)

For a detailed walkthrough of Schedule FA field-by-field, see the Schedule FA step-by-step guide.

Penalty for non-disclosure: ₹10 lakh per year under the Black Money Act. This is not a proportional penalty — it's a flat ₹10 lakh regardless of the asset value.

Form 26AS and AIS reconciliation

Before filing, check your Form 26AS and Annual Information Statement (AIS) on the income tax portal.

AIS now reflects:

• Inward foreign remittances (reported by your bank)
• Securities transactions (if reported by your broker via Indian intermediaries — less common for US brokerages)
• TDS credits

The perquisite TDS should show up as a TDS credit from your employer. The AIS may also flag inward remittances if you repatriated sale proceeds — this isn't a taxable event, but the portal may prompt you to explain it.

If AIS shows an income you've already explained in your ITR, no action is needed. If AIS shows something that doesn't appear in your ITR, you need to either include it or submit feedback on the AIS portal explaining why it's not taxable.

Advance tax: dates and calculations

If your total capital gain for the year (after accounting for layoff) exceeds ₹10,000 in tax liability, you must pay advance tax.

Advance tax deadlines:

Your employer withholds TDS on perquisite income, but NOT on capital gains from selling shares. Capital gains are your responsibility for advance tax.

Interest for missed advance tax (Section 234C): 1% per month on the shortfall for each installment.

Reduced income year = a planning opportunity: if your layoff happens mid-year, your total income for the financial year is lower (6 months of salary instead of 12). This may push you into a lower slab for STCG. Run the math before you sell — it may make sense to sell STCG positions in the layoff year rather than waiting.

Form 67: claiming DTAA credit on dividends

If you received dividends on your US stocks, the US withholds tax at source. With a valid W-8BEN on file (confirming Indian residency), the withholding rate is typically 25% — or 15% if the India-US DTAA rate applies (this requires specific plan types to pass through properly).

You can claim a credit for this US tax withheld against your Indian tax liability. The credit is claimed via Form 67, filed before the ITR-2 due date.

Form 67 requires:

• Country of tax deduction (USA)
• Amount of income (gross dividend in USD, converted to INR)
• Amount of foreign tax paid
• The relevant DTAA article
• TRC (Tax Residency Certificate) — you need a valid Indian TRC

Important: Form 67 must be filed before or simultaneously with ITR-2. Filing it after ITR-2 submission makes the claim invalid.

If dividend amounts are small (<₹5,000 for the year), the credit may not be worth the paperwork. It's always claimable, just decide if it's worth the effort.

ITR-2 filing: what sections to fill

For a laid-off Indian employee with US RSUs, ITR-2 (not ITR-1) is the correct form.

Sections to complete:

• Part B-TI: total income including perquisite from salary and capital gains
• Schedule S: salary details including perquisite amount
• Schedule CG: capital gains from shares (short-term and long-term separately)
• Schedule FA: foreign assets disclosure
• Schedule FSI: foreign source income (dividends)
• Schedule TR: DTAA tax relief (links to Form 67 claim)

Capital gains computation in Schedule CG

You'll need to enter each sale transaction individually (or a summary if your brokerage provides an aggregated report). For each:

• Date of acquisition (vest date)
• Date of sale
• Sale consideration (in INR, using TTBR on sale date)
• Cost of acquisition (perquisite value = FMV × TTBR on vest date)
• Gain / loss

If you have many transactions, consolidate by scrip and tax treatment (LTCG vs STCG) if the tax portal allows it. Some CAs do this; confirm with your filer.

What to do if the perquisite on Form 16 is wrong

This happens. The employer used the wrong exchange rate, or the wrong share count, or failed to include one vest event.

If you find a discrepancy:

1. Flag it immediately with HR/payroll — ask for a corrected Form 16
2. If the financial year is still open (before March 31), a revised TDS filing can fix it
3. If Form 16 can't be corrected, file ITR-2 with the correct numbers and keep documentation showing your own calculation with RBI/SBI TTBR rates

A notice may follow if the ITR doesn't match TDS records. Respond with documentation of your correct calculation.

Summary checklist

Collect documents:

• Form 16 (check perquisite amount is correct)
• All vest confirmations with dates and share counts
• SBI TTBR rates for each vest date and sale date
• Trade history from US brokerage
• Year-end account statement
• 1099-DIV if any dividends received

Calculate:

• Perquisite income for the year (all vests up to last working day)
• Cost basis per share (= perquisite FMV per share at vest)
• Capital gain per sale (sale proceeds − cost basis)
• LTCG vs STCG split by holding period (24-month threshold from vest date)
• Total tax liability including advance tax already paid

File:

• Check AIS and reconcile with your records before filing
• File Form 67 before or simultaneously with ITR-2 (if dividends received)
• Complete Schedule FA (foreign assets)
• Complete Schedule CG (capital gains)
• Pay any advance tax balance before 15 March

Deadlines:

• Advance tax: 15 June, 15 September, 15 December, 15 March
• ITR-2 filing: 31 July (non-audit cases), or 31 October if you get an extension
• Form 67: same as ITR-2 filing date (or before)

The tax filing after a layoff is more complex than a normal year — more income sources, foreign assets, possible capital gains, possible Form 67. Start collecting documents early. The perquisite calculation is the one most likely to have errors; verify it before you file.