The situation
Worked in US (H1B/L1/Green Card), received RSUs from US employer. Moved back to India before all RSUs vested. Remaining RSUs vesting while you're Indian tax resident.
Both countries want to tax. Answer: workday-based allocation.
How does US tax work after you've left?
If still a US person (citizen, GC holder), US continues taxing all RSU vests on worldwide basis. Indian-sourced portion is FTC-creditable.
If US non-resident (gave up Green Card), US taxes only US-sourced portion = (US workdays during grant-to-vest) ÷ (total workdays during grant-to-vest) × vesting income.
How does India tax it?
Once Indian tax resident (after RNOR), entire RSU vest taxable in India as salary perquisite at vesting date FMV.
If RNOR (typically first 2-3 years post-return), only India-workdays portion is Indian taxable.
If still GC holder while in India, US-sourced and India-sourced portions overlap — both countries claim same income.
DTAA and FTC mechanics
DTAA Article 16 framework. Treaty allows India to tax salary from services performed in India (post-move). US can also tax (because of citizenship/LPR), with FTC offsetting.
Result: taxed once at the higher of two rates, not twice.
Worked example
Priya moved to India from the US in June 2024. 4-year RSUs from US employer:
- Granted Jan 2022, vests 25% per year on Jan 1 of 2023, 2024, 2025, 2026
- 2025 vest: $100,000 FMV on Jan 1, 2025
For 2025 vest:
- Grant-to-vest period: Jan 2022 – Jan 2025 (36 months)
- US workdays: Jan 2022 – May 2024 = 29 months
- India workdays: June 2024 – Dec 2024 = 7 months
US-sourced: 29/36 × $100,000 = $80,556. India-sourced: $19,444.
US tax (still LPR): US taxes full $100,000 (worldwide). Withholding 22-37% on W-2. India tax (RNOR): $19,444 as salary perquisite if RNOR. FTC: Claim Indian tax paid on India-sourced portion against US tax (Form 1116). Claim US tax against Indian tax (Form 67).
What if I gave up Green Card before vest?
US non-resident at vest date. US taxes only $80,556 (US-workday portion). India taxes per Indian residency.
If India taxes $80,556 too (RNOR), Form 67 claims credit for US tax against Indian tax.
If India is ROR (after RNOR), India taxes full $100K. FTC available.
When should I time Green Card surrender?
Major lever. Surrendering before large vest can avoid US tax on non-US-workday portion. But triggers Section 877A Exit Tax considerations.
For high-value vests (8-figure equity), timing right worth planning fee.
Practical advice
- Document workdays meticulously — calendar, travel records, employer letter
- Notify US employer of move — may stop US withholding on India-sourced portion
- Open NRO account for vest proceeds if US bank closes accounts
- Coordinate filings — US 1040 + India ITR-2 with FTC reconciliation
Common returning-NRI RSU mistakes
- Reporting full vest in only one country
- Not claiming FTC against higher-rate country
- Selling immediately after vest in INR but reporting USD basis (FX confusion)
- Forgetting broker's mandatory withholding (often default rate, not your real)
CTA: Returning NRI with US RSUs? Get workday allocation done right
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.