Indian RSU Holders: 8 Years of Tax Harvesting Filed Through ITR — A Complete Case Study

The typical Indian software engineer at a US tech company — Google, Microsoft, Meta, Amazon, Nvidia, or any of the hundreds of funded startups — accumulates RSU grants over a career. Eight years of employment at a company with quarterly vesting creates 32 separate lots, each with a different vest date, a different vest-date FMV (the cost basis), and a different capital gain or loss depending on what the stock has done since.

Managing these 32 lots — tracking them, harvesting losses from the right ones, deferring gains on others until the 24-month LTCG threshold, reporting them correctly in ITR-2, disclosing the foreign holdings in Schedule FA every year, and claiming available foreign tax credits — is one of the most technically complex personal tax situations an Indian employee faces.

This guide is a complete case study. It follows Arjun, a software engineer who vested RSUs at a US company over 8 years (FY 2017-18 through FY 2024-25), through every step: the tax mechanics, the lot management strategy, the ITR-2 filings, the Schedule FA disclosures, and what to do about missed prior-year filings.

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The Setup: Arjun's RSU History

Arjun joined a US-listed company's Bangalore office in June 2017. His offer included an initial RSU grant and annual refresher grants. All RSUs vest quarterly. He is now filing his FY 2025-26 ITR-2 and wants to do a comprehensive review of all outstanding lots, harvesting opportunities, and compliance obligations.

Grant and Vesting Schedule

Grant	Grant date	Total RSUs	Vesting	Fully vested
Initial grant	Jun 2017	400 RSUs	25% per year, quarterly	Jun 2021
Year 2 refresh	Apr 2018	100 RSUs	25% per year, quarterly	Apr 2022
Year 3 refresh	Apr 2019	120 RSUs	25% per year, quarterly	Apr 2023
Year 4 refresh	Apr 2020	150 RSUs	25% per year, quarterly	Apr 2024
Year 5 refresh	Apr 2021	180 RSUs	25% per year, quarterly	Apr 2025
Year 6 refresh	Apr 2022	200 RSUs	25% per year, quarterly	Apr 2026
Year 7 refresh	Apr 2023	220 RSUs	25% per year, quarterly	Apr 2027
Year 8 refresh	Apr 2024	250 RSUs	25% per year, quarterly	Apr 2028

After employer sell-to-cover (typically 30% of vested shares sold by employer for TDS):

• Total shares received (net of employer TDS) across all vests: approximately 850 shares held in Morgan Stanley at Work (since transferred partially to IBKR)
• Current stock price: USD 195 (as of March 2026)

The Core Tracking Spreadsheet

Every RSU holder needs this spreadsheet. It is the foundation of all tax calculations:

Vest date	Grant	Gross shares	Shares sold (TDS)	Net shares received	Vest FMV (USD)	Vest FMV (INR)	FX rate	INR cost basis per share
Sep 2017	Initial	25	7	18	$78	Rs 5,070	65	Rs 5,070
Dec 2017	Initial	25	7	18	$85	Rs 5,695	67	Rs 5,695
...	...	...	...	...	...	...	...	...
Mar 2025	Y8 refresh	15	4	11	$210	Rs 18,270	87	Rs 18,270

Where to get this data:

• Morgan Stanley at Work (or E*TRADE at Work): Download "Transaction History" → filter for "Vest" events → shows vest date, gross shares, FMV, shares sold for tax, net shares received
• Employer's pay slips: Perquisite income should appear on each payslip when RSUs vest; the vest-date FMV × gross shares = perquisite value
• Form 16 (annual): Summarises total perquisite income for the year; verify against individual vest statements

The cost basis rule: Your acquisition cost for Indian capital gains purposes is the vest-date FMV — not the original grant-date stock price (which is irrelevant for Indian tax), not the stock's price on the day you choose to sell. The vest-date FMV is what your employer used to calculate the perquisite income and TDS, and it is your acquisition cost going forward.

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Year-by-Year Tax Treatment: What Was Taxed When

The Perquisite Income History

For each financial year, Arjun's Form 16 should have included RSU perquisite income:

FY	Approximate gross shares vested	Approximate vest FMV range	Perquisite income (approx)	TDS on perquisite
2017-18	50	$78-85	Rs 4.2L	Deducted by employer
2018-19	75	$90-110	Rs 5.6L	Deducted
2019-20	100	$115-140	Rs 9.2L	Deducted
2020-21	125	$135-175	Rs 12.8L	Deducted
2021-22	150	$160-220	Rs 18.5L	Deducted
2022-23	150	$130-160	Rs 13.5L	Deducted
2023-24	150	$145-185	Rs 16.8L	Deducted
2024-25	175	$175-215	Rs 22.4L	Deducted

Verify each year: Pull out every Form 16 from FY 2017-18 onward. The perquisite income from RSU vesting should appear under "Value of perquisites under Section 17(2)" or "Profits in lieu of salary under Section 17(3)" — the exact line item label varies by employer's accounting. If a year is missing RSU perquisite income in Form 16, there may be an employer TDS underdeduction — this becomes Arjun's obligation to declare and pay via advance tax/self-assessment tax.

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The Lot Inventory: What Arjun Holds in FY 2025-26

Arjun has sold some shares over the years and still holds approximately 350 shares across multiple lots. His current holding (simplified to key lots for this case study):

Lot #	Vest date	Shares held	Vest FMV (cost basis INR)	Current value INR	Unrealised gain/(loss) INR	Holding period	LTCG eligible?
L-01	Sep 2017	18	Rs 5,070/sh	Rs 16,965/sh	+Rs 2,14,830	8.5 years	Yes — deep LTCG
L-08	Jun 2019	15	Rs 8,450/sh	Rs 16,965/sh	+Rs 1,27,725	6.7 years	Yes
L-14	Dec 2020	18	Rs 13,200/sh	Rs 16,965/sh	+Rs 67,770	5.2 years	Yes
L-20	Jun 2022	22	Rs 14,980/sh	Rs 16,965/sh	+Rs 43,670	3.7 years	Yes
L-24	Jun 2023	20	Rs 18,600/sh	Rs 16,965/sh	−Rs 32,700	2.7 years	Yes — LTCL
L-26	Dec 2023	18	Rs 19,200/sh	Rs 16,965/sh	−Rs 40,230	2.2 years	Yes — LTCL
L-28	Jun 2024	18	Rs 17,800/sh	Rs 16,965/sh	−Rs 15,030	1.7 years	No — STCL
L-30	Dec 2024	16	Rs 16,500/sh	Rs 16,965/sh	+Rs 7,440	1.2 years	No — STCG
L-31	Mar 2025	14	Rs 15,800/sh	Rs 16,965/sh	+Rs 16,310	0.9 years	No — STCG
L-32	Jun 2025	14	Rs 18,270/sh	Rs 16,965/sh	−Rs 18,270	0.7 years	No — STCL

Total holding: 173 shares (simplified subset for this case study)

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FY 2025-26 Harvesting Strategy

Objective

Arjun has the following current-year gains from other sources in FY 2025-26:

• LTCG from selling CSPX units: Rs 1,80,000 (already realised)
• STCG from selling ELSS units: Rs 90,000 (already realised)

He wants to offset these gains through RSU lot harvesting.

Identifying the Harvest Candidates

Best STCG offset (use STCL — most flexible):

• L-28 (Jun 2024): STCL of Rs 15,030
• L-32 (Jun 2025): STCL of Rs 18,270
• Total STCL from selling L-28 and L-32: Rs 33,300

Best LTCG offset (use LTCL):

• L-24 (Jun 2023): LTCL of Rs 32,700 (held 2.7 years — qualifies as LTCL since > 24 months)
• L-26 (Dec 2023): LTCL of Rs 40,230 (held 2.2 years — also LTCL)
• Total LTCL from selling L-24 and L-26: Rs 72,930

Set-Off Calculation

Gain/Loss	Amount	Type
CSPX gain (already realised)	+Rs 1,80,000	LTCG
ELSS gain (already realised)	+Rs 90,000	STCG
L-28 harvest	−Rs 15,030	STCL
L-32 harvest	−Rs 18,270	STCL
L-24 harvest	−Rs 32,700	LTCL
L-26 harvest	−Rs 40,230	LTCL

STCL offset STCG: Rs 33,300 STCL against Rs 90,000 STCG → Rs 56,700 net STCG remains.

Apply remaining STCL to LTCG: No remaining STCL (all Rs 33,300 used against STCG).

LTCL offset LTCG: Rs 72,930 LTCL against Rs 1,80,000 LTCG → Rs 1,07,070 net LTCG remains.

Net taxable gains:

• Net STCG: Rs 56,700 → tax at slab rate 30% = Rs 17,010
• Net LTCG: Rs 1,07,070 → tax at 12.5% = Rs 13,384
• Total tax: Rs 30,394

Without harvesting:

• STCG Rs 90,000 at 30%: Rs 27,000
• LTCG Rs 1,80,000 at 12.5%: Rs 22,500
• Total: Rs 49,500

Tax saved by harvesting L-24, L-26, L-28, L-32: Rs 19,106

The Immediate Repurchase After Harvest

After selling L-24, L-26, L-28, and L-32 (losses harvested), Arjun buys back equivalent exposure immediately:

• Repurchases 70 new shares (approximately equivalent to the 70 shares sold across four lots) at the current price of USD 195 (INR Rs 16,965)
• New cost basis: Rs 16,965/share for all 70 repurchased shares
• New lot date: the purchase date in FY 2025-26

India's no-wash-sale rule means this repurchase is perfectly legal and the loss is fully valid.

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Filing Schedule CG in ITR-2: Lot by Lot

The ITR-2 Schema for Foreign Equity Capital Gains

ITR-2's Schedule CG requires entry of each capital gain event. For RSU sales, each lot sold is a separate entry:

For each LTCG entry (Section 112):

• Asset type: "Shares and Debentures" (foreign equity)
• Full name and description: "Company XYZ RSU shares vested Jun 2023, 20 shares"
• Date of acquisition: vest date (not grant date)
• Date of transfer (sale): the date Arjun sold the shares
• Full value of consideration: sale price × shares × INR FX rate on sale date
• Cost of acquisition: vest-date FMV × shares × INR FX rate on vest date
• Cost of improvement: Rs 0 (no improvements to listed equity)
• Expenditure wholly and exclusively for transfer: brokerage commission in INR
• Short-term/Long-term: Long-term (held > 24 months from vest date)
• Section: 112 (foreign equity, not Section 112A which is for Indian-listed STT-paid)
• Capital gain/(loss): Sale proceeds minus cost minus brokerage

For STCG entry (Section 111A or other):

• Foreign equity STCG does not fall under Section 111A (which is for Indian-listed, STT-paid equity). Foreign equity STCG is taxed at slab rate under Section 2(14) read with the general capital gains provisions.
• Enter in "B2: Short-term capital gains on assets other than those at B1" (which is Section 111A)

The FX rate question: Use the RBI reference rate (FBIL rate) for the specific transaction date:

• Vest date FX rate: from FBIL's historical rate archive for that date
• Sale date FX rate: from FBIL's rate for the sale date
• Both rates must be documented; your CA will source these if you provide the dates

The Critical Section 112 vs 112A Distinction

Section	Asset type	Examples	CGT rate
112A	Indian-listed equity and equity-oriented mutual funds where STT paid	Infosys shares, NIFTY ETFs on NSE	12.5% after Rs 1.25L exemption
112	All other long-term capital assets	US stocks (AAPL, GOOG), Irish UCITS ETFs (CSPX), Unlisted shares	12.5% (no basic exemption for LTCG)

RSU shares of a US-listed company: Always Section 112. No Rs 1.25 lakh exemption applies (that exemption is only for Section 112A assets). If Arjun's LTCG from RSU shares is Rs 1,07,070, he pays 12.5% on the full amount, not on (Rs 1,07,070 − Rs 1,25,000) — there is no deduction because 112 applies, not 112A.

This is one of the most common errors in Indian RSU tax filings: accountants familiar with domestic equity may apply the Section 112A Rs 1.25 lakh exemption to US RSU gains incorrectly.

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Schedule FA: 8 Years of Foreign Asset Disclosure

What Schedule FA Requires

Schedule FA (Foreign Assets) in ITR-2 requires annual disclosure of all foreign assets held at any point during the financial year:

• Account number / ISIN
• Name and address of the foreign institution (Morgan Stanley at Work, IBKR)
• Country: United States
• Peak balance/value during the year (not just year-end)
• Closing balance/value at year-end
• Gross income earned from the asset during the year
• Income taxable in India

For RSU shares, each financial year requires:

• The number of shares held in each foreign brokerage account
• The value at year-end (shares × closing stock price × closing FX rate)
• The year's income: dividends received (if the stock pays dividends)
• Tax on that income (already captured in Schedule CG for capital gains; dividend income in Schedule OS)

8 Years of Schedule FA Obligations for Arjun

FY	Schedule FA required	Contents
2017-18	Yes (from first vest in Sep 2017)	RSU shares in Morgan Stanley at Work
2018-19	Yes	Accumulating RSU shares
2019-20	Yes	Growing portfolio
2020-21	Yes	Portfolio + any partial sales
2021-22	Yes	Portfolio (some transferred to IBKR)
2022-23	Yes	IBKR + remaining MSatWork
2023-24	Yes	Primarily IBKR now
2024-25	Yes	IBKR position current
2025-26	Yes (currently filing)	Post-harvest position

If Arjun missed Schedule FA in any year: He needs to file updated returns (ITR-U) under Section 139(8A). As of FY 2025-26:

• ITR-U can be filed for FY 2022-23 (AY 2023-24) and FY 2023-24 (AY 2024-25) — these are within the 24-month window
• FY 2021-22 (AY 2022-23) may also be in window depending on exact filing date

For years beyond the ITR-U window (FY 2020-21 and earlier), voluntary disclosure to the Assessing Officer or through CBDT's voluntary disclosure mechanism may be available — consult a CA experienced in Black Money Act compliance.

What Happens if Schedule FA Is Missing from Prior Returns

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes:

• Tax at 30% on undisclosed foreign assets (even if Indian CGT would have been lower)
• Penalty equal to 300% of tax on undisclosed foreign assets
• Possible prosecution

For RSU shares that were disclosed as perquisite income at vest (so the employer deducted TDS, and Form 16 captures the income) but not disclosed in Schedule FA:

• The income (perquisite) was disclosed; the asset holding was not
• This is a lesser violation than full non-disclosure of income
• The penalty risk is primarily the Schedule FA omission, not undisclosed income
• File ITR-U immediately for all years within the 24-month window

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Form 44: Claiming Foreign Tax Credit

When Does Form 44 Apply for RSU Holders?

Form 44 (effective TY 2026-27, replacing Form 67) is used to claim credit for taxes paid in a foreign country against Indian income tax on the same income.

Applicable scenarios for RSU holders:

Scenario 1: US dividend WHT on shares If the company stock pays dividends and Arjun holds the shares in IBKR, the US custodian withholds 25% (under India-US DTAA) on dividends before crediting them to his IBKR account. The dividends are:

• Taxable in India as "Income from Other Sources" (slab rate)
• US WHT of 25% was already deducted

Arjun can claim a foreign tax credit of 25% (the amount withheld in the US) against the Indian tax on those dividends. Net Indian tax = Indian slab rate on dividend − US WHT credit.

Scenario 2: US employer payroll tax on RSU vest (W-2 income) US employers of Indian employees working in Indian offices typically do not withhold US payroll taxes. But if Arjun was on a US assignment when some RSUs vested, the employer may have withheld US federal income tax. In this case, the Indian perquisite income and the US W-2 income overlap — Form 44 credit can be claimed for the US tax withheld, subject to the India-US DTAA treaty provisions and the limitation that the credit cannot exceed the Indian tax on that income.

Scenario 3: No credit for employer TDS on RSU vest (Indian TDS) The Indian employer's TDS on RSU perquisite income is the employer deducting Indian income tax — not foreign tax. This TDS is credited against Arjun's Indian income tax liability via Form 26AS. It is not a foreign tax credit scenario.

How to File Form 44

Form 44 is filed along with the ITR-2 return (not a separate filing). It requires:

• Country where foreign tax was paid: United States
• Head of income (in India) to which the credit relates: Income from Other Sources (for dividends) or Capital Gains
• Foreign income included in Indian total income (in INR)
• Foreign tax paid (in INR, converted at the FX rate on the date of payment)
• Indian tax on the foreign income
• Relief claimed (lower of foreign tax and Indian tax)

The credit limit: You cannot claim more credit than the Indian tax on the same income. If the US withheld 25% and your Indian slab rate is 30%, you claim 25% credit — the Indian tax of 30% less the 25% credit = net 5% additional Indian tax. If your income is in a lower bracket (say, 20% effective), you claim only 20% credit (can't claim more than Indian tax, even though 25% was withheld in the US). The unclaimed foreign tax (5% excess) is lost — not refunded by either country.

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Multi-Year Carry-Forward: Managing the Loss Pool

The 8-Year Carry-Forward Schedule

If Arjun has harvested losses in prior years and carried them forward, he must track the aging:

FY of loss	STCL carried forward	LTCL carried forward	Last year to utilise
2018-19	Rs 45,000	Rs 0	AY 2027-28 (FY 2026-27)
2020-21	Rs 0	Rs 78,000	AY 2029-30 (FY 2028-29)
2022-23	Rs 1,15,000	Rs 0	AY 2031-32 (FY 2030-31)
2024-25	Rs 2,80,000	Rs 1,20,000	AY 2033-34 (FY 2032-33)
2025-26	Rs 33,300	Rs 72,930	AY 2034-35 (FY 2033-34)

The FY 2018-19 STCL of Rs 45,000 expires after AY 2027-28. If Arjun does not have enough STCG or LTCG to absorb it before FY 2026-27, it is lost. This creates urgency for the nearest-expiry losses — sell something to generate a gain in FY 2026-27 to use this carryforward before it expires, if it has not been used.

Utilisation Priority

Always use the oldest loss first. If Arjun has:

• FY 2018-19 STCL (expiring soon): Rs 45,000
• FY 2025-26 STCL (8 years to go): Rs 33,300

And he has Rs 50,000 of STCG in FY 2026-27:

• Use Rs 45,000 of the FY 2018-19 STCL first (uses the expiring loss)
• Remaining STCG: Rs 5,000 (offset against Rs 5,000 of FY 2025-26 STCL; remaining FY 2025-26 STCL of Rs 28,300 carries to FY 2027-28)

ITR software typically tracks this automatically through Schedule CFL, but verify manually — the software's carryforward schedule should match your spreadsheet.

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The Complete Annual RSU Tax Filing Calendar

March 31 (End of Financial Year)

• Complete all planned RSU lot harvesting (sell target lots before March 31; US stocks settle T+1 — last trading day March 30)
• Verify all realised capital events for the year (sold lots, received perquisite from new vests)
• Update the lot tracking spreadsheet with FY 2025-26 entries
• Note any lots that will cross their 24-month LTCG threshold in April-June — flag for potential early-FY 2026-27 sale decision

April-June (Post Year-End)

• Download the annual RSU transaction statement from Morgan Stanley at Work / IBKR (look for "Account Statement" → "Gains & Losses" report)
• Download Form 26AS from the income tax portal — verify TDS deducted by employer matches Form 16
• Identify any dividend income received from the stock in IBKR; note the US WHT withheld
• Download IBKR Tax Form 1099 equivalent (available for US account holders) or IBKR's "Tax-Related Transactions" report for non-US accounts
• Calculate all capital gains/losses lot by lot using the tracking spreadsheet

July 31 (ITR-2 Filing Deadline — Non-Negotiable)

• File ITR-2 by July 31. This is the carry-forward deadline.
• Schedule CG: Enter every capital gains/loss event from RSU sales, ETF sales, ELSS redemptions
• Schedule OS: Enter dividend income received from stock holdings
• Schedule FA: Disclose all foreign accounts and holdings as of each account's peak and year-end
• Form 44: Claim foreign tax credit for US WHT on dividends
• Schedule CFL: Verify carried-forward losses match prior-year filings and the current-year utilisation

October 31 (Revised Return Deadline)

If you filed by July 31 but discover an error or missed item, you can file a revised return by December 31 of the assessment year (e.g., for FY 2025-26 / AY 2026-27, the revised return deadline is December 31, 2026). Revising a return to add a missed Schedule FA entry is much preferable to the Black Money Act penalty for non-disclosure.

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The 10-Year Projected Tax Savings: What Systematic Harvesting Is Worth

Assumptions

• RSU vesting continues: 4 lots per year × 15-25 shares per lot
• Stock price volatility: standard deviation of 25% annually (typical for large-cap US tech)
• Average annual realised STCG from other portfolio sales: Rs 1.5 lakh
• Average annual realised LTCG: Rs 2 lakh
• Marginal tax rate: 30% slab; LTCG 12.5%

Estimated Annual Harvest Savings

In a typical year with the above assumptions:

• Harvestable STCL from RSU lots with price below cost: Rs 80,000-1,50,000
• Harvestable LTCL from older lots in decline: Rs 50,000-1,00,000
• STCG offset savings (30% rate): Rs 24,000-45,000
• LTCG offset savings (12.5% rate): Rs 6,250-12,500
• Total annual tax saving: Rs 30,250-57,500

Over 10 years, discounted at 10% (the value of the tax saving reinvested):

• Low estimate: Rs 30,250/year × 10 years at 10% return = Rs 4.8 lakh
• High estimate: Rs 57,500/year × 10 years at 10% return = Rs 9.1 lakh

Rs 5-9 lakh in additional portfolio wealth over 10 years — from maintaining a spreadsheet and making deliberate harvesting decisions every March. No additional investment. No additional risk. Pure tax efficiency.

The only condition: file your ITR-2 by July 31 every year without exception. Every year of timely filing preserves 8 years of carry-forward value. Every year of late filing destroys that year's carry-forward entirely.

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Summary: The RSU Tax Optimisation Stack for Indian Employees

Action	Timing	Tax impact	Effort
Verify all vest events in Form 16	Annual (April-May)	Ensures correct perquisite income basis	Low
Update lot tracking spreadsheet	Each vest event	Accurate cost basis for all future sales	Low
Identify harvest candidates	March each year	Rs 30K-60K annual tax saving	Medium
Execute ETF swaps + RSU lot sales	March 28-30	Lock in losses for set-off	Medium
Repurchase equivalent exposure	Same day	Maintain portfolio, reset basis	Low
File ITR-2 by July 31	Annual	Preserves 8-year carry-forward	High importance
File Schedule FA	Annual	Avoids Black Money Act penalties	Non-negotiable
File Form 44 for dividend WHT	Annual (if dividends received)	Foreign tax credit on dividend WHT	Medium
File ITR-U for missed prior years	As soon as gap identified	Reduces Black Money Act exposure	Urgent

The RSU tax problem is not technically difficult — it is a discipline problem. It requires maintaining the spreadsheet, executing the harvesting transactions, and filing on time, every year. The reward for that discipline, over an 8-year RSU career, is Rs 5-15 lakh in additional portfolio wealth and full legal compliance with India's foreign asset disclosure laws.