How to File ITR-2 for RSU Income — Step by Step Guide (FY 2024-25)

You got RSUs from your MNC employer. Some vested this year, you may have sold a few, and now it's tax filing season. You open the income tax portal and reach for ITR-1 — the form you've used every year — and then you stop. Something feels off.

That instinct is correct. Once you have RSU income, ITR-1 is no longer an option. You need ITR-2, and it's meaningfully more complex: there's a perquisite entry in the salary schedule, a capital gains schedule if you sold shares, Schedule FA for the foreign assets disclosure, possibly Form 67 for DTAA credit, and advance tax obligations you may not have known about. Get any of these wrong and you're looking at notices, penalties, and interest charges that dwarf the original tax itself.

This guide walks through every step, in the right order, with the exact logic you need to file correctly — without panic and without paying a CA unless you genuinely need one.

Why ITR-1 Does Not Work for RSU Income

ITR-1 (Sahaj) is designed for a simple taxpayer: salary income, one house property, and interest income. It explicitly excludes you if any of the following apply:

• You have capital gains income — including gains from selling RSU shares after vesting
• You have foreign assets or foreign income at any point during the year
• Your total income exceeds ₹50 lakh
• You are a director in a company or hold unlisted shares

RSU shares that vest from a US-listed employer (think Microsoft, Google, Amazon, Infosys ADR, etc.) are foreign assets. Even if you sell them the same day they vest, you held a foreign asset momentarily — and the ITR rules do not give you a free pass for same-day liquidation. You must file ITR-2.

ITR-2 covers all salary income, capital gains (both short-term and long-term), foreign assets (Schedule FA), and the DTAA credit claim (via Form 67). It's more forms and more schedules, but each piece follows a logical order.

Documents You Need Before You Start

Gather all of these before opening the income tax portal. Missing even one will stall your filing mid-way.

From Your Employer

• Form 16 (Part A and Part B): This reflects your salary income, TDS deducted, and — critically — should include the perquisite value of vested RSUs in the "Perquisites" row of Part B. Some employers break it out separately; others fold it into the total salary figure.
• RSU vesting statement / stock plan statement: Shows each vest event: date vested, number of shares, FMV (fair market value) per share on vest date, taxes withheld (if any). Usually available on the equity portal — E*Trade, Fidelity, Morgan Stanley, or Shareworks depending on your employer.
• Tax Residency Certificate and foreign tax credit statement: If your employer withheld US federal tax (this sometimes happens for certain grant structures), you need proof of this for Form 67.

From Your Brokerage / Equity Portal

• Transaction history for FY 2024-25: All share sales from April 1, 2024 to March 31, 2025. Note the date of sale, number of shares, sale price in USD, and USD/INR conversion rate on the date of sale.
• Cost basis documentation: The FMV on vest date (in USD) converted to INR is your cost of acquisition for capital gains. Some portals provide this directly; others require you to calculate it.
• Foreign bank account details (if applicable): If proceeds sit in a foreign account before being repatriated, you need account details for Schedule FA.

Other Documents

• Aadhar and PAN details (already linked, you hope)
• Bank account details for refund credit
• Any advance tax challans paid during the year (Challan 280 receipts)

Step 1 — Salary Schedule: Reporting RSU as Perquisite

When RSUs vest, the Income Tax Department treats the fair market value of the shares on the vest date as a "perquisite" — a non-cash benefit received from your employer. This amount is taxed as salary income at your applicable slab rate, in the year of vesting.

The perquisite value is calculated as: FMV per share on vest date (in INR) × number of shares vested.

Your employer should have already included this in your Form 16 under Schedule 17(2) — Perquisites. Verify that it matches your vesting statement. If there's a discrepancy, resolve it with HR before filing — the income tax system will use what's in Form 16 as the baseline, and any mismatch you self-report can trigger a reconciliation query.

Where to Enter This in ITR-2

• Go to Schedule S (Details of Income from Salary)
• Enter gross salary as shown in Form 16
• Under "Perquisites (as per section 17(2))" — enter the RSU vest value if your employer has reported it separately, or confirm it's already embedded in the gross salary figure
• The TDS your employer has deducted (on the perquisite + rest of salary) flows automatically from your Form 16 TDS entries into Schedule TDS1

Step 2 — Capital Gains Schedule: Sales After Vesting

Every time you sell RSU shares after they vest, you have a capital gains event. The gain (or loss) is the difference between your sale proceeds and your cost of acquisition (the vest-date FMV already taxed as perquisite).

Short-Term vs Long-Term Capital Gains on RSU Shares

• Sold within 24 months of vesting: Short-term capital gain (STCG) — taxed at your income slab rate (same as salary)
• Sold after 24 months of vesting: Long-term capital gain (LTCG) — for listed foreign equities, taxed at 20% with indexation benefit, or 10% without indexation for gains above ₹1 lakh (the rules here depend on whether the stock is listed on a recognised foreign exchange; consult a CA if uncertain)

For most MNC employees who sell shares soon after vesting (same-day or within a year), STCG at slab rate is the applicable treatment.

Currency Conversion

All amounts must be converted to INR. Use the telegraphic transfer buying rate (TTBR) published by the State Bank of India for the relevant date — both for the vest-date FMV and for the sale proceeds. The CBDT periodically publishes safe harbour rates; using SBI TTBR is the standard accepted practice.

Where to Enter in ITR-2

• Go to Schedule CG (Capital Gains)
• For short-term gains on equity shares not subject to STT (foreign listed shares typically do not attract STT), use the appropriate section under STCG
• Enter: date of acquisition (vest date), date of sale, full value of consideration (sale proceeds in INR), cost of acquisition (FMV on vest date in INR), and net gain or loss
• If you have multiple vest tranches, enter each separately — do not aggregate across vests with different dates

Step 3 — Schedule FA: Reporting Foreign Assets

Schedule FA (Foreign Assets and Foreign Source Income) is mandatory for any resident Indian who holds foreign assets at any point during the calendar year ending December 31. This is the most misunderstood aspect of RSU taxation — many employees think "I'm not holding foreign shares right now" absolves them from Schedule FA. It does not. If you held RSU shares on a foreign exchange at any point between January 1 and December 31, 2024, you must disclose them.

What to Disclose in Schedule FA

• Foreign equities: Name of company, country, number of shares held, FMV as of December 31 (in both foreign currency and INR), date of acquisition
• Foreign bank accounts: If your equity portal credits sale proceeds to a US brokerage account before you repatriate, that account must be listed — account number, bank name, country, peak balance during the year, closing balance
• Foreign dividends received: If you received any dividends on RSU shares, report this in the income section of Schedule FA

Unvested RSUs — Do You Need to Disclose?

This is a grey area. Unvested RSUs are not yet your property — you cannot sell them, and you have no legal title. Most tax practitioners take the view that unvested RSUs need not be reported in Schedule FA because they are not yet "assets held." However, once RSUs vest and become actual shares, they are clearly foreign assets. The safest approach: disclose vested, unexercised/unsold shares. For unvested grants, consult a CA if your grant value is significant.

Step 4 — Form 67: Claiming DTAA Credit Before Filing ITR

India has a Double Tax Avoidance Agreement (DTAA) with the United States and most countries where MNC employers are headquartered. If any foreign tax has been withheld on your RSU income — typically US federal withholding tax — you can claim it as a credit against your Indian tax liability under Section 90 of the Income Tax Act.

The mechanism: India taxes your global income. But if the US has already taxed the same income, you do not pay double. The credit reduces your Indian tax payable by the amount of foreign tax paid, subject to limits.

The Critical Rule: Form 67 Must Be Filed First

This is where many people make an expensive mistake. Form 67 must be filed on the income tax e-filing portal before or at the same time as your ITR-2. You cannot file the ITR first and submit Form 67 later as a revision. If Form 67 is missing, the DTAA credit will be disallowed — and you'll pay full Indian tax with no offset for the foreign taxes already paid.

How to File Form 67

• Log in to the income tax e-filing portal (incometax.gov.in)
• Go to e-File → Income Tax Forms → File Income Tax Forms
• Search for Form 67 and select the relevant assessment year
• Fill in: country of source (USA), nature of income (salary / perquisite), amount of foreign income in INR, foreign tax paid in INR, and the DTAA article under which credit is claimed
• Upload supporting documents: Form W-2 (or equivalent foreign tax statement), proof of tax paid, DTAA provision reference
• Submit and note the acknowledgement number — you will reference this in Schedule TR of ITR-2

In Schedule TR (Tax Relief) of ITR-2, enter the details of the DTAA credit claimed and the Form 67 acknowledgement number.

Step 5 — Advance Tax: Avoiding Interest on RSU Income

If your total tax liability for the year (after TDS) exceeds ₹10,000, you are required to pay advance tax in four installments during the year. RSU vesting often creates large, sudden perquisite income mid-year — if your employer does not withhold adequate TDS at the time of vesting, you can end up with an advance tax shortfall.

Advance Tax Installment Dates

• June 15: At least 15% of total estimated tax liability
• September 15: At least 45% of total estimated tax liability (cumulative)
• December 15: At least 75% of total estimated tax liability (cumulative)
• March 15: 100% of total estimated tax liability

If you underpay advance tax, interest under Section 234B (for shortfall below 90% of total tax) and Section 234C (for each installment default) applies at 1% per month. For a large RSU vest, this can be ₹50,000–₹1,00,000+ in avoidable interest.

Common Mistakes That Attract Notices

These are the errors that actually result in income tax notices from the department. Most of them are avoidable with the right preparation.

1. Filing ITR-1 Instead of ITR-2

The portal may not catch this immediately, but during processing or scrutiny, using the wrong form leads to defective return notices. You'll be asked to refile in the correct form — potentially after the due date, attracting late filing fees under Section 234F.

2. Not Reporting the Perquisite (Double-Counting Omission)

Some employees assume "it's already in Form 16, the portal will pick it up automatically." Not always. Verify that the perquisite value in your filed ITR matches Form 16 exactly — both under Perquisites and in the gross salary total.

3. Using Wrong Cost of Acquisition for Capital Gains

The cost of acquisition for capital gains is the FMV on the vest date — the same value that was taxed as perquisite. Some people mistakenly use the grant price (which is zero for RSUs) or the original ESOP grant price. Using zero cost of acquisition means you're paying tax on the full sale value, which is incorrect and results in excess tax payment. Using a higher cost of acquisition can result in underpayment and notices.

4. Missing Schedule FA or Partial Disclosure

Disclosing only shares held on March 31 and ignoring shares sold earlier in the year. Schedule FA requires disclosure of assets held at any point during the January 1 – December 31 calendar year. A share you vested and sold in July still needs to be disclosed.

5. Filing Form 67 After the ITR

As detailed above — Form 67 must precede or accompany the ITR. Filing it afterward does not qualify you for the DTAA credit.

6. Forgetting to Report Foreign Dividend Income

If you held RSU shares that paid dividends (common with large US companies), that dividend income must be reported as income from other sources in your ITR, and also in the income section of Schedule FA. Many employees overlook this because the amounts are small, but it's a reporting requirement regardless of size.