• RSU granted in USA

Hello,
 I need a suggestion on tax saving options for my long term RSUs, I am working for MNC based out of USA and consider that i have been granted RSUs worth 10lacs in 2014 (US stock exchange) and after complete vesting i hold RSUs worth 7lac as per 2014 price (30% tax deducted at the time of vesting in US itself), now consider that stocks price has almost doubled and now current value of total RSUs are 14lacs (net profit of 7lacs after deducting 30% tax in US). So as i understand this is considered as long term capital gain and i need to pay 20% tax for it, i.e. 1.4lacs (20% of 7lacs). 
 So my question is does it considered as long term capital gain for tax benefits? I am planning to construct a house in near future, so can i show capital gain for house construction and avail full tax benefit for 1.4lacs? My tax slab is 30%.

Thanks,
Karthik
Asked 7 months ago in Capital Gains Tax

Hi Karthik,

 

Hope you are doing well !!

 

Yes, it would be treated as long term capital gain and you can get capital gain exemption u/s 54F.

 

To claim full exemption the entire sale receipts have to be invested.

 

In case entire sale receipts are not invested, the exemption is allowed proportionately.

 

Please note the for under-construction properties, the new property should be ready within three years of the asset’s sale to get exemption u/s 54F. 

 

 

 

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

Hi karthik,

 

Yes, it will be considered as long term capital gain but I did not understand what benefit are you talking about. There is no set-off available with construction of house.

Lakshita Bhandari
CA, Mumbai
4878 Answers
316 Consultations

5.0 on 5.0

Hi,

 

Yes, your understanding is correct.

 

It does not necessary for new house.

 

However, the new property should be purchased one year before the sale or two years after the sale to get capital gain exemption.  

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

Hello,

 

Yes, LTCG would be chargeable on the sale of this RSUs. And exemption u/s. 54F can be claimed for the investment of the sale proceeds in residential property within specified time limits.

 

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2220 Answers
7 Consultations

5.0 on 5.0

Yes, the purchased house property isn't necessarily required to be a new house property.

Hunny Badlani
CA, Madhya Pradesh
2220 Answers
7 Consultations

5.0 on 5.0

Hi

 

Yes, you can claim the capital gain exemption under section 54F by investing the sale proceeds in a residential house property.

 

You can either invest in a ready to move in already constructed house property or in an under construction property or buy a land and construct a house on it.

Lakshita Bhandari
CA, Mumbai
4878 Answers
316 Consultations

5.0 on 5.0

The capital gain wont be 7 lakh it would be around 5.57 lakh taking into consideration indexation benefit.

You would claim exemption u/s 54F for which you will get that proportion of exemption from capital gain the proportion which you invest in new asset out of sale consideration.

You must construct the house within 3 year to get such exemption.

You must be holding not more than 1 house when you sale such shares.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

You can even purchase a second hand flat and claim exemption.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

For RSUs, the acquisition date is the vesting date.

 

Please find below the criteria: 

  • Short-term capital assets – when sold within 24 months of holding them. Short-term gains are taxed at employee’s income tax slab rates
  • Long-term capital assets – when sold after 24 months of holding them. Long-term gains are taxed at 20% with indexation

 

Yes, your are right.

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

The criteria for LTCG/STCG is based upon the period of holding of the capital asset. If the asset is held for less than 24 months it would be considered as STCG, otherwise, LTCG.

As per Sec. 54F, to claim the exemption the assessee should not be holding more than one house property(other than the one for which 54F investment is made) on the date of transfer of the capital asset for which exemption is claimed.

Hunny Badlani
CA, Madhya Pradesh
2220 Answers
7 Consultations

5.0 on 5.0

I dont know about law in USA but for India the time period is 24 months for foreign shares to be long term.

When you must have vested the shares you must have included it in your return of income as perquisites and when you sale it you need to calculate capital gain and hence capital gain shall be calculated from vesting period.

 

You must own only one house while selling the shares.

Yes you can go for second property.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

Section 54F is applicable in case of sale of any asset. 

Construction should be made on a newly acquired land.  ( Time frame of before 1 year and after 3 years of sale applicable) .

 

Construction of one house property shall be allowed as exemption. It could be a multi-storeyed house property.

Lakshita Bhandari
CA, Mumbai
4878 Answers
316 Consultations

5.0 on 5.0

Sec. 54F exemption is available on LTCG on sale of any capital asset.

To claim exemption u/s. 54F, the assessee should not own more than one residential house, other than the new asset on the date of transfer of the original asset. The exemption available on purchase or construction of a residential property. For your multi dwelling house exemption would be available.

Hunny Badlani
CA, Madhya Pradesh
2220 Answers
7 Consultations

5.0 on 5.0

54F deals with any long term capital gain except land and building thus it will include unlisted shares.

Yes you can make any type of house the only condition is that at the time of sale of the asset you must be holding only one house.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

Yes, sec 54f applies to unlisted shares also.

 

 

if you construct a multi dwelling house with more than one kitchen it is still applicable to tax exemption. 

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

Section 54F applies in case of sale of any Long-term Capital Asset other than Residential House. So, Answer to the first part of your question is Yes.

 

Section 54F uses the words "One residential house in India". So, the House should be capable of being treated as "one house" and should be located "in India". Having multiple kitchen may be treated as one house if it can be part of a single house. There is no definition with related to Number of Kitchens

Pradeep Bhat
CA, Bengaluru
538 Answers
45 Consultations

5.0 on 5.0

Hello Sir,

 

It will be considered as long term capital gain and you can claim total tax exemption by using the money to buy a house property, which needs to be bought one year before the sale or two years after the sale.

 

For under-construction properties, the new property should be ready within three years of the asset’s sale. 

 

Karishma Chhajer
CA, Jodhpur
1846 Answers
13 Consultations

5.0 on 5.0

If the individual or HUF transfer any capital asset other than house property, and invests the amount of net sale consideration to purchase or construct a house property, long term capital gains will be exempt from tax.
In this case, it is important to note that net sale consideration must be invested instead of long term capital gains. If entire net sale consideration is not invested, long term capital gains will be taxable on a proportionate basis. 

 

So, it is applicable to unlisted shares also.

Karishma Chhajer
CA, Jodhpur
1846 Answers
13 Consultations

5.0 on 5.0

Yes, the exemption is available even in case of resale or old property. 

Karishma Chhajer
CA, Jodhpur
1846 Answers
13 Consultations

5.0 on 5.0

If you are selling it now in FY 2020-21 you can deposit the same in Capital gain account scheme till 31.07.2021 till then you can keep the same in your saving account or invest it anywhere else.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

- For opening of capital gain account, date is extended till 30.06.2020.Till then you an keep it in saving account.

- You should not worry about Tax deduction in India as tax @30% is already deducted in USA of which you can claim DTAA relief in India at the time of filing of ITR.

Vivek Kumar Arora
CA, Delhi
3667 Answers
220 Consultations

5.0 on 5.0

Hi,

 

Yes, you can keep the money in tour savings account/ or use it in whatever way you want.

 

You need to transfer the money into cgds account before the due date of filing of account ( 31 July 2020).

Lakshita Bhandari
CA, Mumbai
4878 Answers
316 Consultations

5.0 on 5.0

It is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond due date for furnishing return of income.

 

Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry

 

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

Yes as per the government directions you can open and invest in capital gain account by 30th June,2020

Vishrut Rajesh Shah
CA, Ahmedabad
744 Answers
18 Consultations

5.0 on 5.0

Yes.

Yes.

Yes. The construction should be completed within 3 years of date of sale.

Lakshita Bhandari
CA, Mumbai
4878 Answers
316 Consultations

5.0 on 5.0

Yes sir same has been mentioned by me in my previous answer.

Yes.

If it's an under construction flat then yes otherwise 2 years.

Naman Maloo
CA, Jaipur
3355 Answers
33 Consultations

5.0 on 5.0

Yes.

 

Yes.

 

Yes, the construction must be completed within 3 years of date of transfer.

Payal Chhajed
CA, Mumbai
4488 Answers
77 Consultations

5.0 on 5.0

1. Yes you need to deposit upto 31.07.2021. Till then you can create FD and pay tax on the interest earned on it.

2. Within 3 years payment should be made and ownership is transferred to you.

Vivek Kumar Arora
CA, Delhi
3667 Answers
220 Consultations

5.0 on 5.0

Yes you can keep in FD or current account

 

Yes interst will be taxable

 

Yes but till the time you don't purchase property mandatory to keep under Capital Gain account

 

Vishrut Rajesh Shah
CA, Ahmedabad
744 Answers
18 Consultations

5.0 on 5.0

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