Save tax when income above 50Lakh/1cr

[infinia_finally]

Esops or rsus will get taxed as soon as they vest.. As per my experience.

The companies j worked with, deduct 30% and vest whatever is left.

What you said about elon and company is grue, they dont take salary and they only rely on dividends. But that wouldnt be the case for commmon man

Yes. RSU are taxed as perquisite on vest. But for ESOPS (NQSO - Non Qualified Stock Options), I believe they are taxed on exercise (not on vest). On exercise, you will get taxed on (FMV - exercise price) added as perquisite income at slab rate. In India, NQSO and ISO (Incentive Stock Options) may be treated same (I think) for taxation in hands of employees. So for startups, you could "exercise and hold" when the FMV (as decided in quarterly board meeting) is same as your grant price. This way the perquisite stays zero. And you only incur capital gains when you sell them when startup is acquired/goes IPO etc.

Disclaimer: I am not a CA and this is not tax advice. Please consult CA for accurate guidance.

 

[techt]

Yes. RSU are taxed as perquisite on vest. But for ESOPS (NQSO - Non Qualified Stock Options), I believe they are taxed on exercise (not on vest). On exercise, you will get taxed on (FMV - exercise price) added as perquisite income at slab rate. In India, NQSO and ISO (Incentive Stock Options) may be treated same (I think) for taxation in hands of employees. So for startups, you could "exercise and hold" when the FMV (as decided in quarterly board meeting) is same as your grant price. This way the perquisite stays zero. And you only incur capital gains when you sell them when startup is acquired/goes IPO etc.

Disclaimer: I am not a CA and this is not tax advice. Please consult CA for accurate guidance.

Lets say RSUs worth $10,000 were granted on 1st jan 2023. Vested on 1st jan 2024 i.e., $7,000 worth after deductions. Lets say If I sell on 1st jan 2027 for $12,000. What will be my LTCG? Is it computed on 12K-7K or 12K-10K ?

 

[#aniket]

funny of you to think billionaires will readily get taxed anyday

Billionaire radar me nahi aata easily, aata hai toh bich ka aadmi 😐

 

[paxauquabriba-4876]

create shell corps and transfer all profits to those shell corps and locate them in tax heavens such as panama

my n199a u dont need tax saving u need j3sus

 

[paxauquabriba-4876]

If you have a friend who works for a political party, approach him. Donations to political parties are tax exempt. They'll take a small cut which will be less than tax paid and they will return remaining as cash.

i am writing this to request 100 memebrs of this community to join me & we will start a palytical party of our own to lunder money for our bizmen & serve this cantry of hours. 10% discount code = takenofineyo

 

[infinia_finally]

Lets say RSUs worth $10,000 were granted on 1st jan 2023. Vested on 1st jan 2024 i.e., $7,000 worth after deductions. Lets say If I sell on 1st jan 2027 for $12,000. What will be my LTCG? Is it computed on 12K-7K or 12K-10K ?

On 1/1/23, you got RSUs worth $10K. (let's say 100 RSUs of $100 each)
On 1/1/24, when they vested, depending on market, let's say their FMV is total $10.5K (100 x $105 per share = $10500)
(Note that if these shares are not traded on Indian stock exchanges, company needs a partner (some agency like EY etc) that defines an FMV in Indian context. This could be something like moving avg price.)

IT dept taxes you on $10.5K x (some specific exchange rate) added as perquisite income to your Form 16. And you will pay taxes at slab rate in FY24-25.

Assuming that company sold approx 30 RSUs to cover for 30% tax
Now your cost basis is set to $10.5K ($105 for each share, i.e. total of 70 x $105 = $7350)
If you sell for $12K (let's say $120 per share), then capital gains are $1.5K ($15 per share, i.e. $15 x 70 = $1050 on remaining 70 shares)
For it to be LTCG, from vest date to sale, you need to wait 24 months.
LTCG is 20% (without indexation) -
Refer https://cleartax.in/s/tax-implications-indian-residents-investing-us-stock-markets

To convert gains to rupees, what I do is
Calculate gains in dollars. To convert it to rupees, I take the exchange rate (TT buying rate) on last working day of month preceding the sale. (I read this somewhere)

Edit: If you cover initial perquisite tax from your pocket (typically cut out of your monthly paycheck), then you still have 100 shares. Change the calculation above to 100 shares. The price per share for cost basis, as mentioned above, is still the same.

 

[knight]

On 1/1/23, you got RSUs worth $10K. (let's say N RSUs)
On 1/1/24, when they vested, depending on market, let's say their FMV is $10.5K
(Note that if these shares are not traded on Indian stock exchanges, company needs a partner (some agency like EY etc) that defines an FMV in Indian context. This cou
IT dept taxes you on $10.5K x (some specific exchange rate) added as perquisite income to your Form 16. And you will pay taxes at slab rate in FY24-25
Now your cost basis is set to $10.5K
If you sell for $12K, then capital gains are $1.5K
For it to be LTCG, from vest date to sale, you need to wait 24 months.
LTCG is 20% (without indexation) -
Refer https://cleartax.in/s/tax-implications-indian-residents-investing-us-stock-markets

To convert gains to rupees, what I do is
Calculate gains in dollars. To convert it to rupees, I take the exchange rate (TT buying rate) on last working day of month preceding the sale. (I read this somewhere)

One addition to this.
I've seen 2 broad types of vesting.
1. Sell part of vesting RSUs to cover for taxes.. eg. $3k worth RSU is sold/taken by the company and tax i paid from its value, so our base cost is set to ~$7.5K
2. The second type is already explained above where we pay taxes out of our pocket.

So your base cost and capital gains calculation would depend on how you paid taxes at the time of vesting.

 

[infinia_finally]

One addition to this.
I've seen 2 broad types of vesting.
1. Sell part of vesting RSUs to cover for taxes.. eg. $3k worth RSU is sold/taken by the company and tax i paid from its value, so our base cost is set to ~$7.5K
2. The second type is already explained above where we pay taxes out of our pocket.

So your base cost and capital gains calculation would depend on how you paid taxes at the time of vesting.

Yep. I was thinking in terms of 1 stock, so I think I made a slight mistake. Will correct my earlier answer

 

[sxchzy]

one question why does anybody need to discloe and pay taxes in india for income earned in us
doesnt us have a Dual Taxation Traety

 

[infinia_finally]

one question why does anybody need to discloe and pay taxes in india for income earned in us
doesnt us have a Dual Taxation Traety

Dual taxation avoids double taxation. But we are required to pay tax in 1 country at least.
For US aliens (non residents) are not taxed on capital gains. So we pay in India

FATCA had allowed both countries to share information. So we may come in taxman's net if we don't disclose

 

[knight]

one question why does anybody need to discloe and pay taxes in india for income earned in us
doesnt us have a Dual Taxation Traety

DTT exists.
My understanding is US deducts 25% (for dividends, not sure about Cap gains).

After FY end, we file ITR and report US income for the last calendar year.. and thus pay additional tax or claim it back based on our ITR slab and holding period.
It's designed in a way to ensure we do proper reporting at FY end.
Too much compliance. The interface is terrible and it's a very tedious task to fill each transaction.

 

[thegame]

There is a huge surcharge once you earn more than 50Lakh/1cr and even above.
see the below table for the surcharge being charged.




Considering your 80C, 80D, etc are exhausted, What are some ways to reduce the taxation as well as surcharge?
Note: its a salary income and not business!

Also, would love to know about creating. HUF and paying tax via that. What are the complications and any good CA reference's if you know any?

@someonehere , please let me know if my below understanding is correct,

Surcharge is on the final Income Tax computed, say you have 1C as Income (Salary) and no deductions and via New Tax regime, your calculated tax will be i.e. Income Liable to Tax at Normal Rate will be 27L, now on this 27L surcharge (based on above table) will be 2.7L so overall tax will come to around 31L after adding Health & Education cess..

 

[Pankhuri]

I have heard about it. Its risky and the black money in cash is a big headache for you to spend...

If you have friends in politics, you also have friends who can help you use and convert black money to white.

 

[Pankhuri]

I wish to have such clarity of thoughts in my life. Do suggest some tips sir, if required can DM too.

jab itna kamane waale log khud apna paisa manage karenge, toh wealth management waale kya karenge.

 

[infinia_finally]

@someonehere , please let me know if my below understanding is correct,

Surcharge is on the final Income Tax computed, say you have 1C as Income (Salary) and no deductions and via New Tax regime, your calculated tax will be i.e. Income Liable to Tax at Normal Rate will be 27L, now on this 27L surcharge (based on above table) will be 2.7L so overall tax will come to around 31L after adding Health & Education cess..

For 1Cr, its 15% surcharge, not 10%
And yes, total= tax *1.15 (surcharge)*1.04(cess)

 

[Bugs Bunny]

jab itna kamane waale log khud apna paisa manage karenge, toh wealth management waale kya karenge.

@S S V basically what @Pankhuri is saying that you are eating wealth management guys jobs lol

 

[SSV]

@S S V basically what @Pankhuri is saying that you are eating wealth management guys jobs lol

Yes, may be eating away WM gus jobs, but it is common sense.. and I am giving these advices free of cost which is detrimental to WM guys.. agreed..

BTW:
I have already advised OP to leave these matters to his CA ..

Once you reach to this stage, it is better to concentrate your valuable time on increasing the income in multiples
rather than wasting the same time in how to reduce tax liability ... This would be the practical approach I would take ..

Remember money makes more money and not to worry about taxes.. Hire a good CA, and focus on multiplying income sources...

We all have 24 hrs /day and fixed life span.. .
Death and Taxes can't be avoided..wherever you go in this world.

All the best

 

[paxauquabriba-4876]

On 1/1/23, you got RSUs worth $10K. (let's say 100 RSUs of $100 each)
On 1/1/24, when they vested, depending on market, let's say their FMV is total $10.5K (100 x $105 per share = $10500)
(Note that if these shares are not traded on Indian stock exchanges, company needs a partner (some agency like EY etc) that defines an FMV in Indian context. This could be something like moving avg price.)

IT dept taxes you on $10.5K x (some specific exchange rate) added as perquisite income to your Form 16. And you will pay taxes at slab rate in FY24-25.

Assuming that company sold approx 30 RSUs to cover for 30% tax
Now your cost basis is set to $10.5K ($105 for each share, i.e. total of 70 x $105 = $7350)
If you sell for $12K (let's say $120 per share), then capital gains are $1.5K ($15 per share, i.e. $15 x 70 = $1050 on remaining 70 shares)
For it to be LTCG, from vest date to sale, you need to wait 24 months.
LTCG is 20% (without indexation) -
Refer https://cleartax.in/s/tax-implications-indian-residents-investing-us-stock-markets

To convert gains to rupees, what I do is
Calculate gains in dollars. To convert it to rupees, I take the exchange rate (TT buying rate) on last working day of month preceding the sale. (I read this somewhere)

Edit: If you cover initial perquisite tax from your pocket (typically cut out of your monthly paycheck), then you still have 100 shares. Change the calculation above to 100 shares. The price per share for cost basis, as mentioned above, is still the same.

bruda i canot understand a sheet wrote above but I love ur presentation, calculation, detailation, and explanation, its easy to look & beautiful and all that.

 

[Bugs Bunny]

Yes, may be eating away WM gus jobs, but it is common sense.. and I am giving these advices free of cost which is detrimental to WM guys.. agreed..

BTW:
I have already advised OP to leave these matters to his CA ..

Maybe he was saying in overall context 😅

 

[SSV]

one question why does anybody need to discloe and pay taxes in india for income earned in us
doesnt us have a Dual Taxation Traety

Dual taxation avoids double taxation. But we are required to pay tax in 1 country at least.
For US aliens (non residents) are not taxed on capital gains. So we pay in India

FATCA had allowed both countries to share information. So we may come in taxman's net if we don't disclose

This is correct..

We pay and file ITR's for the global income in the normally resident country , claiming deductions for the amounts paid in other countries which are under DTAA agreement..

The information about the tax payer will be exchanged periodicaly between the coutnries like below:
India shares with the USA under FATCA and
with all other countires under CRS( Common Reporting System)