What Makes an RSU Different?
An RSU is a promise to give you actual shares — at no cost — once vesting conditions are met. Unlike ESOPs, there's no exercise price. The "restriction" is simply the vesting condition. Until those conditions are satisfied, you own nothing.
India vs US: The Critical Difference
In the United States, RSUs work elegantly: shares deposit directly into your brokerage account on the vesting date. In India, the Companies Act only formally recognises ESOPs (with an exercise price) and sweat equity. Indian RSUs are typically structured as deeply discounted ESOPs with an exercise price set at face value — ₹1 or ₹2 per share. You technically exercise them, but the amount is nominal. Same economic effect, different legal form.
Taxation at Two Stages
At Vesting: FMV of shares on the vesting date is treated as perquisite income and taxed as salary. You receive shares, not cash — but the tax liability is immediate and real. Employers deduct TDS. At Sale: FMV at vesting becomes your cost of acquisition. Capital gains rules apply identically to ESOPs.
Foreign Company RSUs (MNC Employees)
Indian residents holding RSUs from a foreign-listed parent must: disclose foreign equity in Schedule FA of their ITR; convert FMV to INR using SBI telegraphic transfer buying rate on the vesting date; check applicable DTAA provisions; track holding periods from the vesting date for capital gains classification.
RSU vs ESOP: Which Is Better?
RSUs are safer — shares always have some value since you received them at near-zero cost. ESOPs offer more leverage — if you exercise at ₹50 and the share is ₹500, you've captured 10× on the appreciation. Early-stage startups lean toward ESOPs. Series B+ companies increasingly use RSUs as valuations rise and exercise costs become meaningful.