What are restricted stock units?

1. RSUs are company shares granted to employees as part of compensation, but these come with restrictions of vesting over time.

2. Employees are not required to pay anything to receive the shares as they are granted for free, subject to vesting.

3. RSUs vest over a set period, commonly in annual or quarterly instalments, say, 20% each year over five years. Till such time, employees don’t own the shares or have any rights.

4. At the time of vesting the market value of RSUs is treated as income and taxed accordingly.

Live Events

5. At the time of sale, the gain or loss after vesting is taxed as capital gain or loss.Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta