If there's one concept that shows up in more places in RSU taxation than any other, it's Fair Market Value — FMV. It appears in your Form 16, in your Schedule FA, in your capital gains calculation, and in the exchange rate math that converts dollars to rupees.
Understanding it properly changes how you think about almost everything else.
The Basic Definition
Fair Market Value is the price at which an asset would change hands between a willing buyer and a willing seller, neither under compulsion, both with reasonable knowledge of the facts.
In plain terms: what could you sell this for today, on the open market?
For a US-listed stock like Google or Microsoft, FMV on any given day is simply the closing price of the stock on that day. The market is constantly determining it. No valuation needed.
For an unlisted Indian company (a startup, for example), there's no market price. In that case, the FMV has to be determined by a Category 1 Merchant Banker registered with SEBI. This valuation is valid for 180 days from the date it's done.
Most Indian employees at large US tech companies are dealing with listed shares, so FMV = closing price on the relevant date.
Where Fmv Shows Up in Your Rsu Life
FMV is not a one-time number. It appears at multiple points, serving different purposes each time.
At vest: The FMV on the vest date determines your perquisite income. If 100 Google shares vest on March 15, 2025, and Google closed at $175 that day, your FMV is $175/share. This figure, converted to INR using the SBI TTBR rate for that date, is the perquisite value that gets added to your taxable salary.
As cost basis: Once you've paid income tax on the perquisite, the FMV at vest becomes your "cost of acquisition" for capital gains purposes (Section 49(2AA) of the Income Tax Act). This is the baseline from which future gains are measured.
At sale: When you sell the shares, the capital gain is: Sale price − FMV at vest. Not sale price − zero. Not sale price − the original grant price. Sale price minus the vest-day FMV.
In Schedule FA: The FMV of your foreign holdings at the peak point during the calendar year needs to be reported in Schedule FA of your ITR. This is a disclosure requirement, not an additional tax.
📊 TABLE: "How FMV Determines Your Tax at Every Stage" [Insert here: 3-row table] Event | What FMV does | Tax consequence Vest date | Sets the perquisite value (FMV × shares) | Added to salary, taxed at slab rate Sale date | Gain = Sale price − vest-day FMV | Capital gains tax (STCG or LTCG) Annual Schedule FA | Peak value of foreign holdings during calendar year | Disclosure only, no additional tax
The Currency Conversion That Tags Along
If your RSUs are in a US company, your FMV is in US dollars. The Indian tax system needs it in rupees.
For the perquisite calculation (Tax Event 1), the conversion rate used is the SBI Telegraphic Transfer Buying Rate (TTBR) on the vest date. This is a legally specified rate under Rule 26 of the Income Tax Rules.
For the capital gains calculation (Tax Event 2), if you sold the shares and the gain is in USD, you convert using the SBI TTBR rate for the last day of the month preceding the month in which the sale occurred. So if you sold in May 2025, you'd use the April 30, 2025 TTBR rate.
These rates are available from the SBI forex division website, or from tools like eximin.net.
A common mistake: using the rate your bank actually gave you when you wired money, or using a Google search exchange rate. The legal requirement is the SBI TTBR for the specific date. Using the wrong rate is a filing error.
Source: SBI TTBR rates — https://www.sbi.co.in/web/nri/forex-services Source: Historical TTBR — https://eximin.net
What Happens When the Stock Falls Below the Vest-day Fmv
If you vest at $175 (FMV) and the stock later falls to $140, and you sell at $140 — your capital gain is negative. You have a capital loss of $35/share.
This loss is real and reportable. Short-term capital losses (from shares held less than 24 months) can be set off against both short-term and long-term capital gains in the same year. Long-term capital losses can only be set off against long-term capital gains.
Losses can be carried forward for eight years. If you have no capital gains to offset now, you can use the loss in a future year when you do.
This means underwater RSU lots — shares that fell below their vest-day FMV — are not worthless. They carry a tax asset. Selling them strategically can reduce your tax on other capital gains.
How Rovia Can Help
If you have multiple vesting lots at different FMV values, different holding periods, and you're not sure which ones are sitting at gains versus losses — that's exactly the kind of analysis Rovia does.
We'll show you your full lot picture: what each lot's FMV was, what it's worth today, where you sit on the LTCG/STCG timeline, and what the most tax-efficient selling sequence looks like.
Source: Section 49(2AA), Income Tax Act — cost of acquisition for RSUs: https://incometaxindia.gov.in Source: Rule 26, Income Tax Rules — foreign currency conversion for perquisite: https://incometaxindia.gov.in/rules/income-tax-rules.htm
