Regarding taxation on ESPP/RSU income from US company (listed in NASDAQ)

Hi, My company is US based company and provide us ESPP/RSU option. My question is when we get any profit/loss from ESPP/RSU then what is the tax amount need to be paid for that. Whether it comes under Short-term gain or it fails in some other category. I'm filing ITR-2 form and need to be fill details about it. I heard that 20.6% tax need to be paid for such income but I don't see any column where this is mentioned in ITR-2. I searched in google but didn't find any reference. Please help me on this issue. Last year I've included this in long term and paid 30% tax on this.

thanks in advance.

asked Jul 30 '12 at 11:03 by Samuel 6112


Taxation would depend on duration of holdings of stocks. If stocks are kept for more than three years, it would be long term gain. Income tax would be at rate of 20% + education cess with indexation benefit.

See long term gain and income tax computation method below:

Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%

In case its not long term gain but a short term gain, whole gains (selling price - buying price) would be taxable as per your tax slab rates.

You will have to fill these details in 'CG-OS' sheet in ITR-2 excel file. 'Full value of consideration' would have selling price. 'Cost of acquisition' would have purchase cost. If any additional amount was spent on transfer/selling like brokerage etc, that can be reduced under 'Expenditure on transfer' field.

Please note that in case this is a long term gain, you can save income tax by investing into capital gain bonds u/s 54EC or into residential house property u/s 54F.

answered Jul 30 '12 at 15:50 by Pankaj Batra 5.2k320

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When you sell the your RSU/ESOP/ESPP (after vesting period is over) and get back the money, its your responsibility to pay the tax on the amount in India. How much tax is to be paid by you, depends on the nature of the gains. If you sell the shares before 1 year of acquiring the shares, then the gains are called Short Term Capital Gains (STCG) and if you sell the shares after 1 year, then the gains will logically be Long Term Capital Gains.

If stocks are listed in indian stock exchanges, then you have just have to pay 15% tax on Short Term Capital Gains and no tax on long term capital gains. However if stocks are not listed on indian stock exchanges, but some foreign country, then you will have to add the short term capital gains tax in your income and pay tax as per your slab rate, and 20% with indexation on the long term capital gains, which is the case when STT is not paid when the transaction is done.

Below is the simple table which will explain things to you Listed/Gain-Type Short Term Capital Gain Long Term Capital Gain (Less than 1 yr) (More than 1 yr) Stocks Listed on Indian 15% Tax on Profits No Tax Stock Exchange

Stocks NOT Listed on Indian Stock Exchange Profits will be treated as 20% with Indexation your Income and taxed as per your Slab

Incase Stocks are listed on Foreign Stock Exchange

In these cases, it might happen that when you sell your RSU, ESOP’s or ESPP, the tax is directly cut by the trading portal like etrade (in US) and you only get reduced number of units (after tax). After that when you take the money back in India, you might have to pay the tax on the income again if the double tax treaty is not available with that country.

answered Jul 25 '14 at 12:46 by Radhika Bhardwaj 161

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Asked: Jul 30 '12 at 11:03

Seen: 11,860 times

Last updated: Jul 25 '14 at 12:46