Many professionals working in top Indian companies like Infosys, Wipro, TCS, ICICI Bank, Axis Bank, Zomato, Swiggy, MakeMyTrip, CGI, and others are being granted foreign RSUs (Restricted Stock Units) by their global parent companies—often listed in the U.S. or other foreign jurisdictions.
But here’s a critical tax compliance issue most employees miss:
Key Tax Insight
If you hold, vest, or exercise RSUs in a foreign company, these are classified as foreign assets under Indian income tax law. As per the Income Tax Act, you are mandatorily required to report these under:
- Schedule FA (Foreign Assets) of your Income Tax Return.
Common Filing Mistake
Most salaried individuals wrongly file ITR-1, believing they only have salary income. However, ITR-1 is not allowed if you have:
- Foreign income or assets
- Foreign RSUs, ADRs/ADSs, or shareholdings in overseas companies
- Capital gains or perquisite income from such foreign shares
Correct Form: You must file ITR-2, even if all your income is from salary and RSUs, and there is no business income.
What to Check Before Filing
- Form 16 – Look for the perquisite value of RSUs taxed as part of your salary.
- Grant/Vesting Statements from your employer or equity portal
- Confirm whether RSUs were:
- Granted by a foreign-listed entity
- Exercised or sold in the current financial year
- Still held at year-end (this also triggers foreign asset disclosure)
Non-Compliance Risks
Filing the wrong ITR form (like ITR-1) despite having foreign RSUs can lead to:
- Scrutiny notices from the IT Department
- Penalties for inaccurate disclosures
- Possible action under the Black Money (Undisclosed Foreign Income and Assets) Act in extreme cases
The IT Department has become more vigilant. Cross-checks from Form 16, foreign asset disclosures, and TDS reporting are now common during assessments.
Tips to Stay Compliant
- Always consult a tax professional if you’ve received foreign RSUs, even if no shares were sold.
- Maintain proper documentation: vesting schedules, holding statements, and tax perquisite breakups.
- Disclose foreign shares correctly in Schedule FA, including:
- Country of incorporation (e.g., U.S.)
- Nature of asset (Equity, RSU, etc.)
- Date of acquisition
- Peak balance during the year and year-end value
Summary
| Scenario | Form to File | Disclosure Required |
|---|---|---|
| Only salary in India | ITR-1 | No |
| Salary + Foreign RSUs | ITR-2 | Yes – Schedule FA |
| RSUs exercised/sold | ITR-2 | Yes – FA + Capital Gains |
| ESOPs/RSUs from Indian company | ITR-1 or 2 | No Schedule FA |
Frequently Asked Questions (FAQ)
Q1. I didn’t sell any RSUs. Do I still need to file ITR-2?
Yes. Holding foreign RSUs at the end of the financial year itself requires reporting in Schedule FA, and that is not available in ITR-1.
Q2. The RSUs are mentioned in Form 16 as taxable perquisites. Isn’t that enough?
No. Form 16 disclosure is not a substitute for foreign asset reporting under Schedule FA.
Q3. What if I file ITR-1 by mistake?
This may be treated as a defective return or non-disclosure, and you may receive a notice or penalty later. Always amend or revise the return using ITR-2 as soon as you notice the error.
Final Word
Don’t let a small compliance miss turn into a major tax issue. If you work at a company offering foreign RSUs, take the extra time to verify and file your return correctly using ITR-2. The tax department is actively monitoring such cases—it’s better to be accurate and safe.
Stox N Tax 
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