Sell your RSUs like a plan, not a panic.
Which shares you sell, and when, can change your tax bill by lakhs. Here is how Indian tax treats US stock you got at work, and a planner to try it on your own lots.
A software engineer at Microsoft in Bengaluru. He holds 200 MSFT shares, 20 left from each of his last ten quarterly vests. He is buying a home and wants his RSUs to fund the down payment and a ₹1.2 lakh EMI, without handing more than he must to the taxman.
Arjun is illustrative. His vest prices and exchange rates are made up; MSFT is set at $500, and you can change everything below.
You have already paid tax on these shares once
On each vest date the shares’ value (price × shares × the dollar rate) is added to your salary as a perquisite and taxed at your slab. Microsoft withholds that tax, usually by selling some of the vested shares (sell-to-cover), which is why 20 of each vest are left.
That vest-day value becomes your cost. When you sell later, only the rise above it is taxed again, as a capital gain, and it is worked out in rupees. So a weaker rupee raises your gain even if the dollar price did not move.
The 24-month line
India treats US-listed shares as unlisted: no Indian exchange, no securities transaction tax. Unlisted shares only become long-term after being held more than 24 months from the vest date. Many engineers sell at 13 months thinking they qualify. They don’t.
Long-term gain: 12.5%, no indexation. Short-term gain: added to your income at your slab, 30% for most RSU holders, plus surcharge and cess. Since 23 July 2024 that gap is the whole game.
Plan the sales
Arjun’s lots are loaded. Change the price, the rate, the EMI, or put in your own lots.
Your lots against the 24-month line
200 shares in 10 lots · long-term (12.5%) · short-term (your slab)
Lot by lot
Tax if sold today, and once long-term
A loss on a short-term lot can be set off against both short- and long-term gains; a long-term loss only against long-term gains.
Paying ₹1.2 L a month for 12 months
Each quarter, from lots already long-term, oldest first
- 10 Oct 2026Sell 8 shares (8 from the Feb 2024 lot)₹15,410 tax
- 10 Jan 2027Sell 8 shares (8 from the Feb 2024 lot)₹15,410 tax
- 10 Apr 2027Sell 8 shares (4 from the Feb 2024 lot, 4 from the May 2024 lot)₹15,077 tax
- 10 Jul 2027Sell 8 shares (8 from the May 2024 lot)₹14,745 tax
Total tax ₹60,642 on ₹15.2 L raised, all at the long-term rate. Selling quarterly also keeps the rest invested for longer.
Buying a home? Section 86 (old 54F)
Selling your 60 long-term shares today raises ₹28.5 L with a long-term gain of ₹7.7 L. Put all of it into one residential house and ₹7.7 L of that gain is exempt, saving about ₹1,10,456 in tax.
Buy within 1 year before or 2 years after the sale, or build within 3. You must not own more than one other house on the sale date. Exemption is proportional to the amount invested, capped at ₹10 crore.
Edit the lots (Arjun’s figures are illustrative; enter yours from Morgan Stanley)
How this is worked out: cost is each lot’s value at vest (already taxed as salary); sale value uses today’s price and rate. Long-term gains taxed at 12.5%, short-term at your slab, plus surcharge (capped at 15% on long-term gains) and 4% cess: 14.3% vs 34.3% for you. Your CA will convert both legs at SBI’s TT buying rate under Rule 115, so final rupee figures will differ a little. Illustrative only, not tax advice.
Get your lots out of Morgan Stanley
- Log in to Morgan Stanley at Work (StockPlan Connect or E*TRADE, depending on your account). Menu names change from time to time; look for your stock plan’s holdings and release history.
- Open the release (vest) history. For each release note the release date, shares released, shares withheld for tax and the fair market value per share.
- Download the release confirmations and the gain/loss or cost-basis report. Keep them; your CA will ask.
- Match each vest to your payslip. The perquisite line and your Form 16 show the rupee value you were taxed on. That is your cost.
- Check which lots a sale will use. Brokers default to oldest-first, which usually means long-term lots. If your account lets you pick specific lots, pick deliberately.
Buying a home? Section 86 can make the gain tax-free
Under Section 86 of the Income-tax Act, 2025 (Section 54F of the old Act), a long-term gain from selling shares is exempt if you put the net sale proceeds into one residential house in India: bought up to 1 year before or 2 years after the sale, or built within 3 years.
Invest only part and only that share of the gain is exempt. It does not apply if you already own more than one other house on the sale date, the exemption is capped at ₹10 crore, and selling the new house within 3 years claws it back. Only long-term lots qualify, one more reason to watch the 24-month line.
Report it right
Good moves, costly moves
Do
- Keep a sheet of every lot: vest date, shares, value at vest.
- Fund EMIs from lots past 24 months, oldest first.
- Keep a few months of EMI in the bank so you are never forced to sell short-term.
- Spread big sales across financial years to stay in a lower surcharge band.
- Time a home purchase to use Section 86 on long-term gains.
- File Schedule FA every year, and Form 67 for dividend tax.
Avoid
- Assuming 12 months makes US shares long-term.
- Selling your newest lots in a hurry.
- Counting shares that sell-to-cover already sold.
- Ignoring the rupee: a flat dollar price can still be a rupee gain.
- Letting one company’s stock become most of your net worth.
- Skipping Schedule FA because you didn’t sell anything.
Want this done on your real lots?
We will map your vests, plan the sales around your EMIs or down payment, and line up the home purchase so Section 86 works for you. No commission from builders.