RSU take-home after Indian perquisite tax: the exact calculation

RSU vesting shows up on paper as, say, a 20 lakh event. The number on your offer letter, the number your equity management platform displays, the number your manager references in your review. The number you actually take home is meaningfully smaller. This guide shows you exactly why, and how to compute it.

Use the RSU take-home calculator to compute your exact take-home for any vest.

What happens at vesting: broker mechanics and timing

When your RSUs vest, a precise sequence of events unfolds — often within the same business day:

1. Shares transfer from the company's equity plan (Fidelity, Morgan Stanley, E*Trade, Schwab) to your individual account on the vest date.
2. FMV is determined — typically the closing price on the vest date, or sometimes a volume-weighted average price (VWAP) for that day. Check your plan document; most use closing price.
3. Perquisite value is computed — FMV per share x shares vested x USD/INR TTBR on vest date. Your employer's payroll system calculates this.
4. TDS is triggered — the employer must deduct TDS for the month in which the vest falls. They do this via sell-to-cover: the equity platform automatically sells enough shares to fund the tax.
5. Sell-to-cover executes — typically 1-3 business days after vest. The shares sold are at the market price at the time of sale, which may differ from vest-date FMV if the stock moved.
6. Remaining shares land in your brokerage account, fully owned and free to sell or hold.
7. Payroll records the perquisite and TDS in that month's salary register; it flows into Form 24Q (quarterly TDS return) and eventually into Form 16.

Acquisition cost = zero for standard RSU grants (you paid nothing for the grant). So the entire FMV is taxable.

The tax computation

Example: 200 RSUs vest when stock is $120, USD/INR = 92

Perquisite value: 200 x $120 x 92 = 22,08,000

Tax at different income levels (new regime, FY 2026-27):

The difference between no surcharge (138 shares) and top surcharge (122 shares) is 16 shares — worth $1,920 or approximately 1,76,640 at these prices. Surcharge planning matters.

Surcharge: the hidden RSU cost

Many RSU recipients in the 50-80 lakh total income range are surprised to learn their effective tax rate is 34.32%, not 31.2%. The 10% surcharge on the base tax (30% x 1.10 x 1.04 cess) is the culprit.

The marginal rate spike at 50 lakh: A vest that pushes you from 49 lakh to 51 lakh total income means surcharge applies to the entire 51 lakh, not just the incremental 2 lakh. This cliff effect means large RSU vests in the 40-55 lakh income zone deserve careful timing consideration.

Detailed surcharge calculation at the 50 lakh cliff

Say your base salary is 45 lakh and a vest adds 8 lakh perquisite (total: 53 lakh).

Without surcharge (if total were 49L):

• Tax at 30%: approximately 14,70,000
• Cess 4%: 58,800
• Total: approximately 15,28,800

With 10% surcharge (total 53L):

• Tax at 30%: 15,90,000
• Surcharge 10%: 1,59,000
• Subtotal: 17,49,000
• Cess 4%: 69,960
• Total: approximately 18,18,960

The 4 lakh that pushed you over 50 lakh cost an extra 90,160 in surcharge and cess — an effective marginal rate of 22.5% on just that 4 lakh. Budget 2023 introduced marginal relief provisions for the new regime; consult your CA if your income is within 5 lakh of any surcharge threshold.

Can you defer vesting? Usually no — your employer sets the vest schedule. But understanding the income cliff helps with timing any discretionary decisions.

TTBR rate: buying vs selling

The exchange rate used to convert the USD vest value to INR is the SBI Telegraphic Transfer Buying Rate (TTBR) — the rate at which SBI buys foreign currency from a customer.

• Buying rate (TTBR): used for converting income received in foreign currency — applies to the RSU perquisite and to the capital gains cost basis.
• Selling rate (TTSR): used when the bank sells foreign currency to you.

The buying rate is slightly lower than the selling rate. For RSU perquisite calculation, your employer's payroll should use the SBI TTBR on the vest date. Find historical SBI TTBR rates on the SBI website under Forex Rates — Historical Rates.

How TDS spreads across the year vs lump sum

Your employer typically computes estimated annual income (including projected RSU vests) at the start of the financial year and sets a monthly TDS amount. When an actual vest occurs:

1. The actual perquisite value is added to that month's taxable income.
2. TDS for the remaining months is recalculated to make the annual TDS projection correct.
3. This can cause a sudden large TDS deduction in the vest month.

Example of TDS adjustment:

• Annual salary: 18 lakh. Monthly TDS: 30,000.
• September vest adds 8 lakh perquisite.
• New projected annual income: 26 lakh.
• TDS shortfall by October: 1,20,000. Spread over remaining 6 months — extra 20,000 per month.

This is normal. Verify by checking: (annual tax estimate based on total projected income) divided by 12 months multiplied by months remaining = TDS per remaining month.

What to do if your employer under-TDS'd

Under-TDS happens when the employer miscalculated the perquisite, used a wrong exchange rate, or the vest happened late in the year with insufficient months remaining to spread the tax.

Steps:

1. Check Form 26AS after the vest month to confirm TDS deposited equals what you calculated.
2. If TDS is short, compute the gap = (actual tax liability) minus (TDS deposited to date).
3. Pay self-assessment advance tax by the next deadline (June 15, September 15, December 15, or March 15) to avoid Section 234B and 234C interest.
4. When filing ITR-2, the tax deposited (including your self-payment via Challan 280) will be reconciled against your total liability.
5. Interest under Section 234A applies only if you pay after July 31 (ITR filing due date). Paying before filing avoids this.

Self-assessment tax payment: go to incometax.gov.in — e-Pay Tax — Challan 280 — select "Self Assessment Tax (300)" or "Advance Tax (100)" depending on timing.

Advance tax self-assessment for RSU holders

If you expect your employer TDS to be insufficient, plan advance tax payments yourself:

Formula per quarter: Advance tax needed = (cumulative % x full-year tax estimate) minus TDS already deducted by employer

If the employer TDS covers the cumulative requirement, no self-payment is needed for that quarter.

Quarterly vest compounding over a year: 4 tax events

With quarterly vesting, you have 4 separate perquisite events per year. Each has its own USD/INR rate, its own FMV, and its own TDS deduction:

In this illustration the employee's base salary is 18 lakh and 4 quarterly vests add 16.25 lakh. Total income approximately 34.25 lakh — below the 50 lakh surcharge threshold. But if the stock moves up 20% by Q4, a single large vest can unexpectedly trigger surcharge.

The Form 16 check

After each vest, verify:

1. The perquisite value in your pay stub matches the calculation above
2. The TDS deducted covers your liability at your actual marginal rate
3. Form 16 Part B shows the perquisite under "Perquisites valued as per rules"

Many global payroll systems compute RSU perquisite at the employer's stock plan administrator's FMV, which may differ slightly from the actual market price at the moment of vest. Small discrepancies are common; large ones (above 5%) should be queried with payroll.

What the retained shares are worth in various scenarios

Continuing the example (138 shares retained, acquired at 11,040 per share = $120 x 92):

After 24 months, any further gain switches to LTCG at 12.5% — cutting the tax bill by 60% vs STCG.

Common mistakes

1. Treating the 22 lakh vest as take-home At 34.32% effective rate, you keep approximately 14.5 lakh equivalent (131 shares) — not 22 lakh.

2. Not tracking the vest-date FMV You need this for capital gains when you sell. Record the FMV and USD/INR rate on the actual vest date.

3. Assuming employer TDS is correct If your investment declaration was wrong, if a large unexpected vest happened, or if your employer uses the prior year's rate, TDS may be off. Check Form 26AS after each vest.

4. Forgetting Schedule FA Every year you hold RSU shares in a US brokerage, disclose them in Schedule FA. Use the Schedule FA helper.

The one-line version

A 20 lakh RSU vest becomes approximately 13-14 lakh in actual shares after sell-to-cover at a 34% effective rate. Use the RSU take-home calculator to compute your exact number before each vest.