If you are an NRI (Non-Resident Indian) working in the U.S. tech industry, you have probably noticed that your job offer is not just about a salary. Most tech companies include equity in the form of RSUs, stock options, or other grants as a key part of your total compensation.
While cash covers your lifestyle and savings goals, equity can be a major wealth-building tool, especially in the fast-growing tech sector. However, for NRIs, understanding equity also means understanding its cross-border tax implications and how it fits into your long-term financial plans in both the U.S. and India.
This guide breaks down how tech equity works, how it is earned, and what NRIs should keep in mind about taxes, vesting, and future planning.
Cash vs. Equity Compensation for NRIs in the U.S.
Think of your compensation in two parts:
1. Cash and Benefits:
Your base salary, bonuses, 401(k) match, and health insurance. This covers day-to-day living, savings, and financial security.
2. Equity Ownership:
This is your share of the company, typically through Restricted Stock Units (RSUs) or Stock Options. If your company performs well, the value of this equity can grow significantly, helping you build wealth over time.
For NRIs, this distinction is even more important because cash income is taxed immediately in the U.S., while equity may trigger taxation at multiple points (vesting, sale, and possibly in India if you move back).
Why U.S. Tech Companies Offer Equity to Employees?
Equity aligns employees’ goals with the company’s success. It is a way for employers to:
- Reward and retain talent by giving you a stake in the company’s growth.
- Stay competitive in the U.S. tech market, where stock-based compensation is standard.
For NRIs, this also means you are participating in the same wealth-building structure that has benefited thousands of U.S.-based tech professionals, but with additional tax and repatriation considerations to plan for.
Types of Equity Compensation for NRIs Working in U.S. Tech Companies
The kind of equity you receive often depends on your company’s stage:
- Early Stage (Seed to Series A): Incentive Stock Options (ISOs), Non-Qualified Stock Options (NSOs), or Restricted Stock Awards (RSAs).
- Growth Stage (Series C and beyond): Restricted Stock Units (RSUs) are more common, sometimes alongside stock options.
- Public Companies: Primarily RSUs. Executives may still get NSOs or performance-based stock.
For NRIs, RSUs are the most common type, and understanding their tax treatment in both the U.S. and India is essential.
RSU Vesting and Taxation for NRIs in the U.S.
When you are granted equity, you do not own it immediately. It vests over time, typically following a four-year schedule.
- 1-Year Cliff: You must complete one year before any shares vest. On your one-year anniversary, 25 percent of your shares vest at once.
- Remaining Vesting: The rest vests gradually, often quarterly, over the next three years.
This structure encourages employees to stay longer, aligning your tenure with the company’s growth.
For NRIs, vesting is a key tax trigger. RSUs are taxed as ordinary income in the U.S. when they vest, even if you do not sell them.
Understanding Dollar-Denominated Equity Grants
Companies often phrase equity as a dollar amount, for example, “$100,000 in equity.”
This does not mean you are getting $100,000 in cash. Instead, that number determines how many shares you will receive based on the stock’s price on the grant date.
Example:
If the stock is $5 per share, you get 20,000 shares.
If it is $12.50 per share, you get 8,000 shares.
A lower stock price means more shares and greater upside potential.
For NRIs, keep in mind:
- You will be taxed when the shares vest, based on their fair market value (FMV).
- If you sell the shares later, capital gains tax applies, and if you move to India, those gains may also need to be reported under Indian tax laws.
How Equity Growth Impacts Wealth for NRIs in the U.S.
The value of your grant depends on how the company performs.
- If the stock price goes up: Your equity’s value increases, potentially doubling or tripling your initial grant.
- If it falls: The value can drop below your initial offer.
For NRIs, it is wise to track vesting and market value closely, and plan tax withholding and future remittances to India accordingly.
Conclusion
For NRIs working in the U.S., understanding how your tech equity works can make a significant difference in your long-term financial outcomes. RSUs and stock options can accelerate wealth creation, but they also bring complex tax obligations in both countries. Balancing cash and equity compensation, planning for future vesting, and staying compliant with U.S.,India tax rules are all key to maximizing your rewards.
Platforms like iNRI can help simplify this process for NRIs by offering expert guidance on cross-border taxation, repatriation, and compliance. Whether you are managing vested RSUs, planning to return to India, or simply want clarity on how to optimize your equity, getting professional advice early can help you retain more of what you earn.
Frequently Asked Questions
1. How are RSUs taxed for NRIs?
RSUs are taxed as ordinary income in the U.S. when they vest. If you later sell the shares, capital gains tax applies. If you move back to India, you may also need to report and pay Indian tax, but the U.S.–India DTAA can help avoid double taxation.
2. Can NRIs transfer or hold RSU proceeds in India?
Yes. After selling vested shares, you can remit proceeds to India under the Liberalised Remittance Scheme (LRS), subject to FEMA rules.
3. What happens to my unvested equity if I leave the U.S.?
Unvested shares are typically forfeited. However, vested shares remain yours, though managing them from abroad might involve extra tax and reporting steps.
4. Should I prioritize cash or equity?
Cash offers stability, while equity provides upside. For NRIs, consider your long-term plans. If you expect to return to India soon, the tax benefits of equity may be limited.
5. Do I need to report my U.S. equity in India?
Yes, if you are an Indian tax resident or move back later. You must report foreign assets, such as U.S. brokerage accounts or equity holdings, in your Indian income tax return.
