ESOP & RSU Taxation in India: Perquisite + Capital Gains (with Example)
Taxed twice: at exercise/vesting as salary perquisite (slab rate, employer deducts TDS), and at sale as capital gains (cost = FMV already taxed). US RSUs need >24 months for LTCG.
The two tax events
| Event | What is taxed | Rate |
|---|---|---|
| Exercise (ESOP) / vesting (RSU) | FMV − exercise price (RSU: full FMV, price = nil) | Your slab rate — TDS by employer u/s 17(2) |
| Sale of shares | Sale price − FMV already taxed | 12.5% LTCG / 20% STCG (listed); slab if short-term unlisted |
Holding periods that decide LTCG
| Share type | LTCG needs | LTCG rate |
|---|---|---|
| Listed in India (sold on exchange) | >12 months | 12.5% (above ₹1.25L/yr) |
| Unlisted / listed only abroad (US RSUs) | >24 months | 12.5%, no indexation |
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in
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Frequently Asked Questions
Twice: at exercise as a salary perquisite (FMV minus exercise price, at your slab rate with employer TDS) and at sale as capital gains (sale price minus the FMV already taxed).
RSUs have no exercise price, so the full FMV at vesting is the perquisite. ESOP perquisite is only FMV minus the price you pay. Sale taxation works the same for both.
More than 24 months for LTCG, because shares listed only on a foreign exchange count as unlisted in India. Selling at 18 months is still short-term.
Yes — employees of eligible DPIIT-recognised startups can defer the perquisite tax for up to 5 years, or till exit/sale, whichever is earlier.