Long term capital gain tax on stocks

Since the tax has already been paid at the time of vesting, there will be no more tax liability now. RSU grants are treated more like perquisites and taxed at part of your salary so it is not a Long Term Capital gain and unfortunately no refund.

Hi,

Since the stock will be sold in USA, and you earn profit on the same, you may to pay tax in USA as per the tax laws of USA.

If as per DTAA, capital gain is taxable in USA, you don't need to pay tax in India taking benefit of DTAA.

Hi,

Firstly, please be clear that the concept of RSU Grants (i.e. Restricted Stock Units Grants) is not an eligible tax benefit scheme in Indian Taxation system i.e. in case your employer of US has framed the same as per the guidelines of Indian Tax authorities which is quite unlikely. Here in India, to be eligible for tax benefits, the scheme has to fall within the approved guidelines of Employee Stock Option Scheme (i.e. ESOP Scheme).

Hence, your RSU grants would be simply treated as acquisition of capital assets outside India.

Further, at the time of acquisition of such capital assets i.e. Stocks of the company which is listed in US, the source of Income was already taxed in US. In such case you had to apply under Form 10F and obtain Tax Residency Certificate or Tax Paid Certificate from US authorities, furnish the same here in India in Form 10F.

You were required to declare such income in India at that point of time and claim the benefits of DTAA under the same. I hope the same has been done.

Secondly, as far as sale of such stocks is concerned, the same procedure of Form 10F and TRC has to be adopted. Now important point here is that the DTAA should cover Capital Gains Tax also quite comprehensively, which is not the case of DTAA between India and the US. Since both the jurisdictions tax Capital Gains differently, the same may not work for you this time.

Hence, you have to pay Long Term Capital Gains Tax (i.e. @20%) since the same are not traded on Indian Stock Exchanges.

Further, you can save the amount of Tax here in India by investing the sale proceeds in one residential unit in India or by investing into Capital Gains Scheme Bonds as per the guidelines.

Hence, at the time of sale of shares, you have to pay tax in US as well as in India.

Also, please note that you should declare the same in Income Tax Return, whether the same are already taxed or not.

I hope your query is clear.

Feel free to revert for any further clarification.

Regards,

CA. Sunny Thakral

it would already have been declared in the year when the TDS was deducted.

Hi

The taxation of RSUs happen twice:

1. When vested

2. When sold

Since these are not listed on Indian exchange, it would not be STT paid and hence considered as unlisted shares which become long term after 2 years of holding.

Since you want to sell it after 2 years only, it will be a Long term capital gain.

Hi,

These shares are unlisted securities in India and hence they do not qualify for LTCG exemption in India. 

They are very much as long term capital gains on sale transaction. The tax rate in India for such gains is 20 % with indexation. 

Tax deduction was done when they were allowed on the date of exercise on the FMV of the shares subtracted by cost paid by u. Since u have paid nothing for rsu allotment, the entire FMV was taxed as salary income. We are also aware the process in which such taxes are collected. When the shares get allotted, some shares gets sold at source before allotment to cover the taxes payable to the authorities and only the net shares are allotted. This is called sell to cover transaction. 

These tax deduction will be tax credit in your hands and it will be very reflected in your form 16 to be issued by your employer. 

Sell to cover transaction is required to be disclosed in the tax return to be filed.

Capital gains are separately taxable in the value sold subtracted by FMV taken in last step of taxability. Only the incremental value is taxable. 

These capital gains are required to be disclosed in the tax returns. 

Thanks !

Since the stocks are listed in foreign country, it will be considered STCG and taxed at normal rates if sold within 3 years of vesting.

Also, upon vesting, the RSUs have to be declared under schedule FA of income tax return.

Now, if the foreign government has deducted any tax at the time vesting, it can be claimed as deduction while computing STCG.

Thanks

Dear Sir,

You need to disclose it in ITR and pay the LTCG tax on the profit element. You can claim the relief of tax paid in US from the total tax liability in India.

Thanks

Hello,

You will be required to pay tax @ 20% after taking indexation benefit.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP