Restricted Stock UnitsRSU
Also known as: RSU, RSUs
Restricted stock units are a grant of company shares that an employee earns over time rather than receiving upfront. When RSUs are awarded, the employee is promised a number of shares that will be delivered on future dates as they vest, usually contingent on continued employment and sometimes on performance. Until each tranche vests, the units are not actual shares — they are a promise — which is why leaving before vesting normally means forfeiting whatever has not yet vested.
RSUs are widely used because they align employees with company value and encourage them to stay through the vesting period, while being simpler than stock options in one respect: they have no exercise price, so they retain value as long as the shares do. On vesting, the shares are delivered and are typically treated as taxable income at that point, based on their market value; any later gain or loss when the shares are sold is a separate matter. This makes the vesting schedule and the underlying share value central to how much an RSU grant is really worth.
In the Indian GCC market, RSUs from global parent companies are a significant part of senior and specialist compensation, especially where the parent is a listed multinational. For Director and VP-level candidates, the size and vesting schedule of an RSU grant can materially change the value of an offer and often factors heavily in retention. Employees should also understand the tax treatment of foreign-company RSUs in India, since vesting and sale can create reporting and tax obligations. For buyers, RSUs are a strong retention and attraction tool, but their pull depends on the candidate understanding and trusting the future value.
Frequently asked questions
What are restricted stock units (RSUs)?
Restricted stock units are a form of equity compensation in which a company promises to give an employee shares once conditions, usually a vesting schedule, are met. Until the units vest the employee does not own the shares, and unvested units are typically forfeited if they leave.
What is the difference between RSUs and stock options?
RSUs are a promise of shares that the employee receives on vesting with no purchase price, while stock options give the right to buy shares at a set exercise price. RSUs keep value as long as the shares have value, whereas options only pay off if the share price rises above the exercise price.
What happens to RSUs if you leave the company?
Unvested RSUs are usually forfeited when an employee leaves, while units that have already vested and been delivered as shares are the employee’s to keep. The exact rules depend on the plan and the reason for leaving.
Are RSUs taxable in India?
Yes. RSUs from a foreign parent are generally taxable in India as income when they vest, based on the shares’ market value at that time, and any gain when the shares are later sold is taxed separately. Employees holding foreign shares may also have reporting obligations, so specific tax advice is worthwhile.