From vest to ITR-2: the complete 12-step workflow for Indian RSU holders

Most RSU filing errors happen because the filer does the right steps in the wrong order. Specifically: filing the ITR-2 first, then trying to file Form 44 afterwards to claim Foreign Tax Credit. The Income Tax portal accepts the late Form 44 — and the FTC claim then gets denied on the next processing cycle, leaving you with an unexpected tax demand for the US tax already paid.

The right order is the inverse: Form 44 first, ITR-2 second. Both must be submitted before the assessment year due date (July 31 for non-audit cases). The Form 44 takes 20 minutes if your documents are ready. The ITR-2 takes 45 minutes if you've worked through the schedules in advance. This article is the order-of-operations walkthrough.

We assume you've already worked through:

• How RSU double-taxation actually works (the framework)
• Reading your Morgan Stanley StockPlan Connect statement (where each USD field lives)

If you haven't, start with those — this article assumes you have INR-converted values ready and you understand which field maps where. If you're filing in a hurry without that prep, our Schedule FA wizard automates the conversions and produces the schedules in CSV form for your CA.

The 12-step workflow at a glance

Step	What	When
1	Gather documents	Before April 30 (the deadline for receiving 1042-S)
2	Compute INR values (SBI TTBR conversions)	After all documents in hand
3	File Form 44 (FTC claim)	Before filing ITR-2
4	Log in to e-filing portal, start ITR-2	After Form 44 acknowledgment received
5	Fill Personal Information + Filing Status	First ITR-2 section
6	Fill Schedule S — Salaries (perquisite from vest)	Second ITR-2 section
7	Fill Schedule OS — Income from Other Sources (dividends)	Third ITR-2 section
8	Fill Schedule CG — Capital Gains (from sale)	Fourth ITR-2 section
9	Fill Schedule FA — Foreign Assets (calendar year disclosure)	Fifth ITR-2 section
10	Fill Schedule FSI + Schedule TR (claim FTC via Form 44)	Sixth ITR-2 section
11	Review tax computation, pay self-assessment if needed	Before submit
12	Submit ITR-2 and e-verify within 30 days	Final

If you've used the wizard, steps 2 through 10 are pre-computed; you transcribe values into the ITR-2 form fields. If you're going fully manual, expect 60-90 minutes for the full workflow.

Step 1: Gather documents

Make sure you have all of these before starting. Missing documents are the most common reason filers stall mid-process.

From Morgan Stanley StockPlan Connect:

Document	Where to find it	Purpose
Annual Activity Statement	stockplanconnect.morganstanley.com → Statements → Annual	Source of all vest/sale/dividend events
Form 1042-S	Tax Forms section (available by March 15 of following year)	FTC supporting document for dividend WHT
Form 1099-B	Tax Forms section (available by January 31)	Sale transactions (used for cross-verification)
Form 1099-DIV	Tax Forms section	Only if you're a US tax resident (not needed for India-only filing)

From your employer:

Document	Purpose
Form 16	India-side TDS on salary, including any perquisite TDS your employer deducted
Form 12BA	Detailed perquisite breakdown — verify RSU vest values match Morgan Stanley statement
Salary slip for vest months	Cross-verify perquisite TDS that flowed through India payroll

From your bank / brokerage:

Document	Purpose
Bank statement (for the financial year)	Verify dividend deposits in INR if you remitted them
Foreign currency conversion certificates	If you converted USD dividends to INR via Indian bank (Form A2 / Outward Remittance)
Tax Residency Certificate (TRC)	Not always needed for India-US DTAA but useful if asked

From the Income Tax portal:

Document	Where	Purpose
Form 26AS	incometax.gov.in → e-File → Income Tax Returns → 26AS	Cross-verify all TDS deducted
AIS (Annual Information Statement)	incometax.gov.in → AIS	Auto-populated income summary — verify against your records
TIS (Taxpayer Information Summary)	incometax.gov.in → TIS	Refined version of AIS used to pre-fill ITR-2

SBI TTBR rate sheet:

You'll need the TTBR for several specific dates: every vest date, every dividend payment date, every sale date, and December 31 (for Schedule FA closing value). Download these from the SBI website or use the SBI TTBR converter we built for past dates.

Step 2: Compute INR values

Before opening the ITR-2 form, convert every USD figure to INR using the prescribed SBI TTBR on the activity date. Build a single spreadsheet with these columns:

Date	Event	Symbol	Qty	USD per share	USD total	TTBR	INR total
02-Feb-2026	Vest	MSFT	50.000	$410.50	$20,525	83.20	Rs 17,07,680
14-Mar-2026	Dividend	MSFT	35.18	$0.83	$29.20	83.40	Rs 2,436
15-Apr-2026	Sale	MSFT	20.000	$435.00	$8,700	84.00	Rs 7,30,800

For sales, you'll also need to compute the cost basis using the vest-date TTBR, not the sale-date TTBR:

| Cost basis = 20 shares × $410.50 × Rs 83.20 = Rs 6,82,672 | | Capital gain (INR) = Rs 7,30,800 − Rs 6,82,672 = Rs 48,128 | | Holding period = 02-Feb-2026 to 15-Apr-2026 = 73 days → STCG (≤24 months) |

For dividends, you'll need both the gross dividend in INR and the US tax withheld in INR (both using the dividend payment date TTBR):

| Gross dividend = $29.20 × Rs 83.40 = Rs 2,436 | | US WHT @ 25% = $7.30 × Rs 83.40 = Rs 609 | | Net = Rs 1,827 (matches the deposit in your account) |

This spreadsheet is the source of every figure you'll enter into ITR-2. Save it; you'll need it again for next year's return and for any future scrutiny.

Step 3: File Form 44 (Foreign Tax Credit claim)

Form 44 replaces Form 67 for AY 2026-27 onwards (covering Financial Year 2026-27, return due July 31, 2027). For AY 2025-26 and earlier, you still file Form 67. The mechanics are identical; only the form number changed.

The critical timing rule: Form 44 must be filed on or before the due date of the original ITR, not after. Late Form 44 filings lead to the FTC being denied on processing.

To file Form 44:

1. Log in to incometax.gov.in
2. Navigate to e-File → Income Tax Forms → File Income Tax Forms
3. Search for "Form 44" (or "Form 67" for earlier AYs)
4. Select the relevant Assessment Year
5. Enter the country of foreign income source: United States of America
6. Enter the country code: 2 (this is the Indian-tax-form code, not ISO)
7. For each foreign income type:
   • Income type: Dividend (for dividends) or Salary (for US-side perquisite tax, if applicable)
   • Gross income in INR
   • Tax paid in foreign country in INR (the US WHT)
   • Date of payment of tax
   • Document evidence reference (1042-S form number)
8. Upload supporting documents:
   • 1042-S (PDF)
   • 1099-B if claiming FTC on sales (rare for Indian residents)
   • W-2 if US-side perquisite tax was paid
9. Review and submit
10. Save the acknowledgment number — you'll reference this in ITR-2 Schedule TR

After submission, you get an Acknowledgment Number. Note this; you'll quote it in Schedule TR of ITR-2.

Step 4: Log in to e-filing portal, start ITR-2

1. incometax.gov.in → Login (use PAN as user ID, OTP via Aadhaar-linked mobile)
2. Click "Income Tax Returns" → "File Income Tax Return"
3. Select Assessment Year: AY 2027-28 (for income earned April 2026 to March 2027)
4. Select Filing Type: Original
5. Select ITR Form: ITR-2 (required if you have capital gains or foreign income; do not select ITR-1)
6. Click "Start New Filing"
7. Choose "Online" mode (vs offline JSON upload)

You'll see the ITR-2 with several sections in the left-hand navigation. The portal saves drafts automatically; you can pause and resume.

Step 5: Personal Information + Filing Status

The Personal Information section is mostly pre-filled from PAN + Aadhaar. Verify:

• Name (matches PAN exactly)
• DOB
• Aadhaar number
• Address
• Email + mobile (for OTP)
• Bank account (for refund credit — keep one verified account selected)

Filing Status section:

Field	What to select
Residential Status	Resident (for Indian residents — the default case in this guide)
Are you opting for Section 115BAC new tax regime?	Choose Old Regime or New Regime — for RSU holders the calculation differs; we'll cover both below
Are you holding any foreign assets?	Yes (this triggers Schedule FA visibility)
Are you required to file return under section 139(1)?	Yes

Old Regime vs New Regime. For most RSU holders with significant perquisite income, the Old Regime is typically better because Section 80C, 80D, HRA, and other deductions remain available. The New Regime offers lower slab rates but eliminates most deductions. Run both calculations before choosing. If your perquisite income alone pushes you well into the 30% bracket, deductions matter more than rate reductions, and Old Regime usually wins.

Step 6: Schedule S — Salaries (perquisite from vest)

This is where your RSU perquisite income gets added to your salary.

For employees of a US company with India payroll:

The vest perquisite usually appears already on your Form 16 (Section B, "Perquisites" line). Your employer's payroll team adds the INR-converted vest value to your taxable salary, deducts TDS, and reports it on Form 16. Verify the amount against your spreadsheet — if your employer used a different TTBR rate or wrong vest date, you'll need to reconcile.

Schedule S fields to fill:

Field	Source
Salary as per Section 17(1)	From Form 16 Part B, item 1(a)
Allowances exempt under section 10	From Form 16 Part B, item 2 (HRA, etc.)
Value of perquisites — Section 17(2)	From Form 16 Part B, item 1(b) — this is where RSU perquisite appears
Profits in lieu of salary — Section 17(3)	Rarely applicable
Less: Standard Deduction	Auto-calculated at Rs 50,000 (Old Regime)
Gross Salary	Auto-totaled

Cross-verification: the perquisite figure should equal the gross vest value (in INR) shown on your Morgan Stanley statement, converted at the vest-date SBI TTBR. If they don't match, identify which is wrong:

Common mismatch causes	Resolution
Employer used vest-date FMV but wrong TTBR	Reconcile and use the prescribed SBI TTBR
Employer didn't include some vests in payroll	Add the missing vest as "Income from Other Sources" or request corrected Form 16
Multiple grants vested same day; only one included	Trace each grant separately
ESPP discount vs RSU vest confused	ESPP discount and RSU vest are both perquisites but reported on separate lines

For India-resident employees of a US company without India payroll (e.g., contractor, foreign-employer arrangement): your employer didn't deduct TDS, so the entire perquisite tax falls on you to pay via self-assessment. Add the gross vest value to Schedule S as "Salary from foreign employer" with the country code 2.

Step 7: Schedule OS — Income from Other Sources (dividends)

Dividends received on RSU shares are taxable in India as Income from Other Sources at slab rates.

Schedule OS fields:

Field	Source
Dividend Income (1.a)	Sum of gross dividends in INR (from your spreadsheet)
Foreign dividend disclosed separately	Yes — break out US-source dividends here
Country of source	2 (United States)

The gross figure (before US WHT) goes here, not the net. The US WHT will be credited via Form 44 (Schedule TR), not subtracted from the gross dividend.

Quarterly dividend example: if you received four quarterly dividends from MSFT — each $0.83 × ~35 shares × TTBR varying — sum all four quarterly figures in INR and enter as a single Schedule OS Dividend Income line.

Step 8: Schedule CG — Capital Gains (from sale)

For each share sale during the year, you'll record the transaction here.

Section 112 framework for foreign equity (post Budget 2024):

Holding period from vest date	Tax treatment	Schedule CG section
≤ 24 months	STCG at slab rate	"Short-Term Capital Gains — Section 111A not applicable"
> 24 months	LTCG at flat 12.5%	"Long-Term Capital Gains — Section 112"

For each sale, fill these fields:

Field	Example
Date of transfer (sale)	15-Apr-2026
Sale price / consideration (INR)	Rs 7,30,800
Date of acquisition (vest date, not grant date)	02-Feb-2026
Cost of acquisition (INR using vest-date TTBR)	Rs 6,82,672
Indexed cost (if claiming indexation — NOT available for foreign equity post-2024)	N/A
Capital gain	Rs 48,128
Holding period	73 days → STCG
Type of asset	"Listed Equity / Foreign Listed Equity"
Country of source	2 (United States)

If you sold from multiple vest tranches in a single sale (you sold 20 shares but they came from two different vest dates), file each tranche as a separate entry. Morgan Stanley's 1099-B uses First-In-First-Out (FIFO) accounting by default — but you can specify lot identification if you want a different treatment. For India tax, follow whichever accounting method you used to enter the trade.

STCG vs LTCG tax computation:

Type	Formula
STCG (held ≤24 months)	Capital gain × your slab rate (no flat 15% benefit — that's for Indian listed equity only)
LTCG (held >24 months)	Capital gain × 12.5% under Section 112

Indexation removed. Pre-Budget-2024, foreign equity LTCG had indexation benefit at 20%. Post-Budget-2024, the rate is 12.5% with no indexation. Don't try to claim indexation; it'll trigger scrutiny.

Step 9: Schedule FA — Foreign Assets (the calendar year disclosure)

This is the highest-stakes schedule because non-disclosure triggers Black Money Act exposure (30% tax + 3× penalty + 3-10 year prosecution). It's also the most frequently mis-filed because the timing convention is different from the rest of the return.

Schedule FA is calendar year (Jan-Dec), not financial year (Apr-Mar). Even if shares were sold in the financial year and you no longer own them at year-end, they must be disclosed if you held them at any point during the calendar year corresponding to the financial year you're filing for.

For AY 2027-28 (income earned April 2026 to March 2027), Schedule FA covers calendar year 2026 (January 1 to December 31, 2026).

Schedule FA Section A3 — Foreign Equity / Debt Interest:

This is the relevant section for RSU shares.

Field	Source / Value
Country	2 (United States)
Country Name	UNITED STATES OF AMERICA
Name of Entity	Company whose stock you hold (e.g., Microsoft Corporation)
Address of Entity	Company HQ address (verify from latest 10-K filing or company IR page)
ZIP Code	Company HQ ZIP
Nature of Entity	Foreign Listed Company
Date of Acquisition	Earliest vest date for that holding in the calendar year
Initial Value (INR)	Cost basis at acquisition using vest-date TTBR
Peak Value during the Year (INR)	Highest market value during calendar year × TTBR on that date
Closing Value (INR)	Value as of Dec 31 × TTBR on Dec 31
Total gross amount paid / credited (interest, dividend, etc.)	Sum of dividends received in INR (gross)
Total gross proceeds from sale (INR)	Sum of sale values in INR

One row per company, not per vest. If you have 100 Microsoft shares from 8 different vest dates, that's one row in Schedule FA. The Initial Value is the cost basis of the earliest acquisition that's still held; Peak Value and Closing Value use the company's market price.

Common Schedule FA errors:

Error	Why it matters
Country code "USA" or "840" instead of 2	Triggers data validation failure
Reporting on FY basis (Apr-Mar) instead of CY (Jan-Dec)	Material under-disclosure
Custodian name "Morgan Stanley" instead of "Morgan Stanley Smith Barney LLC"	Formality but flagged in some scrutiny
Closing value at sale-date USD price instead of Dec-31 market price	Wrong asset valuation
Missing entry for unvested grants that were granted but not vested in the calendar year	Grants are not assets until vested — these should NOT appear on Schedule FA
Missing entry for ESPP shares purchased but not yet sold	ESPP shares are foreign equity holdings — these SHOULD appear

Step 10: Schedule FSI + Schedule TR (Foreign Source Income + Tax Relief)

Schedule FSI records the income from foreign sources for tax-treaty matching.

For each income type from the US:

Field	Value
Country code	2
Tax Identification Number (your US SSN if applicable, else 'NA' for Indian-resident with no US filing)	Most Indian-only residents use NA
Head of income	Salary / Other Sources / Capital Gains
Income from outside India in INR	The relevant figure
Tax paid outside India in INR	US tax paid on that income
Tax payable on such income in India	India tax at applicable rate
Section under DTAA	Article 16 (Salary), Article 10 (Dividend), Article 13 (Capital Gains) for India-US
Tax relief available	Min(US tax paid, India tax on this income)

Schedule TR records the actual FTC claim:

Field	Value
Country code	2
Total taxes paid outside India in INR	Sum of US tax (from 1042-S and any W-2)
Total tax relief available	Sum of relief from Schedule FSI
Form 44 Acknowledgment Number	From Step 3
Date of submission of Form 44	From Step 3

If Schedule TR shows a Form 44 acknowledgment from before the ITR-2 submission date, the FTC claim is procedurally complete. If it shows a Form 44 submitted after the ITR-2 (because you filed in the wrong order), the FTC will be denied on processing.

Step 11: Review tax computation

The portal will compute total tax payable. Verify:

Tax computation component	Should equal
Salary income (incl. perquisite) — basic + slab tax	What your Form 16 shows + RSU perquisite delta
Dividend income — slab tax on gross	Schedule OS dividend × slab rate
Capital gains — STCG slab / LTCG 12.5%	Schedule CG figure × applicable rate
Surcharge if total income > Rs 50 lakh	10% / 15% / 25% / 37% bands
Health & Education Cess	4% on tax + surcharge
Less: TDS from Form 16 + Form 26AS	Total TDS deducted
Less: FTC from Schedule TR	The US tax claim
Less: Self-assessment tax (if any paid before return filing)	What you already paid
Net tax payable / refundable	The bottom line

If net tax payable is positive, pay the balance as self-assessment tax via the Income Tax portal (Challan 280 → Self-Assessment Tax 300). The challan reference flows back into the return automatically.

Step 12: Submit and e-verify

After verification:

1. Click "Preview Return" → review the full ITR-2 document
2. Click "Proceed to Submit"
3. Submit the return
4. Within 30 days, e-verify the return using:
   • Aadhaar OTP (fastest)
   • Net Banking
   • Demat account
   • EVC via bank ATM
   • Send signed ITR-V to CPC Bengaluru by physical post (slowest — avoid if possible)

E-verification is not optional. An unverified return is treated as not filed and triggers late-filing consequences. Set a calendar reminder for 25 days after submission to verify in case you forgot.

After filing: what to keep

For 8 years from the assessment year:

• Filed ITR-2 acknowledgment + ITR-V
• Form 44 acknowledgment
• Morgan Stanley annual statement
• 1042-S, 1099-B, 1099-DIV
• Form 16, Form 12BA, Form 26AS, AIS PDF
• SBI TTBR rate-sheet for all dates referenced
• Bank statements for the financial year
• Spreadsheet of computations (Step 2 working)

The 8-year retention is because Section 132 (search) cases can re-open returns up to 6 assessment years (and 10 for serious cases). Black Money Act has no time bar at all.

Our Schedule FA wizard keeps all of this organized — encrypted PDFs, INR computations, ready-to-attach Form 44 evidence. V1 is free; V2 (multi-year dashboard, 8-year retention compliance built in) is in development.

Common workflow errors

Cross-referenced from our RSU double-taxation framework, the workflow-specific errors are:

Error	Consequence
Form 44 filed AFTER ITR-2	FTC denied on processing — you pay both US and India tax
Schedule FA on FY basis instead of CY basis	Under-disclosure; Black Money Act exposure
RSU perquisite included in Salary but missing from Schedule FSI	FTC claim incomplete; portal may auto-deny
Capital gains computed in USD not INR	Wrong tax amount; mismatched with bank deposit records
Net dividend (after US WHT) entered as gross in Schedule OS	Under-disclosure of income; FTC over-claim risk
Submitted but not e-verified within 30 days	Return treated as not filed; late penalty
Sale of multi-tranche RSUs entered as a single transaction	Multiple cost basis dates conflated; usually leads to incorrect gain
Self-assessment tax paid but Challan reference not entered	Tax payment unclaimed; may trigger demand notice
Old Regime selected without comparing to New Regime	Possibly higher tax than necessary

Next in the series

The framework series is now three articles:

• How RSU double-taxation actually works — the framework (three events, DTAA, Section 112)
• Reading your Morgan Stanley StockPlan Connect statement — field-by-field translation from USD to INR
• This article — the 12-step ITR-2 execution

The final article in this series handles the most complicated scenario:

• RSU vesting while in US vs India — different tax treatment — the bilateral scenario when you were physically in the US during some vests and India during others, with the residency rules and the three states an Indian tech worker cycles through.

After that:

• Schedule FA disclosure guide — Schedule FA deep dive
• Form 67 vs Form 44 transition — the AY 2026-27 form transition mechanics
• The Schedule FA wizard — automate all of this from a single Morgan Stanley PDF

This article reflects AY 2027-28 forms and rates (current as of June 2026). The framework holds across rate and form changes; we update worked examples annually after each Union Budget.