Schedule FA for RSU and ESPP Holders — What to Disclose, How to Compute It, and What Happens If You Don't

Schedule FA trips up more RSU and ESPP filers than any other schedule in the ITR. Not because it is conceptually difficult — it isn't. It trips people up because the rules are specific in ways that feel arbitrary until you understand the underlying logic, and because most online guidance stops at "you need to disclose foreign assets" without explaining what that actually involves.

This guide covers what Schedule FA requires, why it exists, which tables apply to RSU and ESPP holders, the one calculation (peak value) that almost nobody gets right, and the penalty regime that makes non-disclosure genuinely expensive.

What Schedule FA Is and Why It Exists

Schedule FA was introduced in Assessment Year 2012-13 as part of India's commitment to automatic exchange of financial information under the OECD Common Reporting Standard. It requires every Indian tax resident to disclose all foreign assets and foreign-sourced income in their ITR — regardless of whether tax was paid on those assets, whether the assets generated any income, and whether any money was brought to India.

The department uses Schedule FA data for risk profiling, not just immediate tax recovery. If you disclose an account this year that you didn't disclose last year and the account existed last year, that inconsistency is visible. The AIS (Annual Information Statement) now aggregates data from multiple foreign sources. The gaps show.

Two things that do not exempt you from filing Schedule FA:

• Your employer deducted TDS on the perquisite at vesting. The shares are now foreign assets in your name regardless.
• You didn't sell anything. If you held the shares at any point during the calendar year, you disclose them.

Unvested RSU grants are not yet property — they are conditional rights — and are generally not reportable. Once shares vest and are credited to your Fidelity or Morgan Stanley account, they become foreign assets and must be disclosed every year until you sell them all.

The Calendar Year Issue — the Most Common Source of Confusion

Indian income tax operates on a financial year (April to March). Schedule FA does not. It follows the calendar year — January 1 to December 31 — of the relevant foreign jurisdiction. For US accounts (Fidelity, Morgan Stanley, Schwab), that means January to December.

So when you file ITR for FY 2025-26 (AY 2026-27), Schedule FA covers assets held at any point between January 1, 2025 and December 31, 2025.

Here is where it gets counterintuitive: shares that vested in January or February 2025 fall into FY 2024-25 for capital gains purposes (if held from April 2024). But for Schedule FA in the same ITR (FY 2025-26), you must disclose them in A3 if you held them at any point in CY 2025 — even if you had already sold them by March 2025.

The capital gains schedule and Schedule FA cover overlapping but different periods. Both need to be filled correctly and consistently.

A2 vs A3 — Which Table Applies to You

Schedule FA has eight sub-tables (A1 through G). For RSU and ESPP holders, two are relevant in almost every case.

A2 covers the account level. A3 covers the holding level. Both are typically required — one entry in A2 for your brokerage account, and one row in A3 for each company whose shares you hold.

What A2 requires

Name of the financial institution, country, account number, status (Owner), account opening date, peak balance during the calendar year, closing balance on December 31, and any gross interest or income credited to the account during the year. Convert all balances to INR using the Rule 115 SBI TT Buy rate for the relevant month-end.

If you do not know the exact account opening date, use an approximate year. Leaving it blank is worse than an approximation — blank fields attract scrutiny during processing.

What A3 requires

For each company: name, country (USA for US-listed stocks), nature of entity (Listed Equity Shares — Foreign), date of acquiring the interest (use the earliest vest date for that company), initial value of the investment, peak value during the calendar year, closing value on December 31, total dividends received during the year, and total sale proceeds from shares sold during the year. All in INR.

If you hold shares from two different companies — say NVIDIA from one employer and Microsoft from a previous one — each goes into a separate A3 row.

Peak Value — The Field Nobody Gets Right

Initial value and closing value are straightforward. Peak value is where most filers either guess, use the closing value, or leave it blank. None of those are correct.

Peak value is the highest aggregate market value of your holding in that company on any single day during the calendar year — January 1 to December 31. It is not the highest price the stock ever reached. It is the highest value of the shares you actually held, accounting for the fact that your holding changes as you vest more lots or sell some.

To compute it correctly you need:

• The daily closing price of the stock for every trading day in the calendar year
• Your exact share count on each of those days (which changes with each vest and sale)
• The SBI TT Buy rate for the preceding month-end of the month that day falls in

You then compute (price × shares held × SBI TT rate) for each day and find the maximum. That is your peak value for A3.

The December 31 closing balance is almost never the peak — stocks typically have their high points at other points in the year. Using December 31 as peak understates your disclosure. The department has the price data. If your peak value is implausibly close to your closing value every year, it looks wrong.

Shares Sold During the Year — Still Disclose

If you vested shares in March and sold them in August, both fall within CY 2025. On December 31, your holding is zero. Your first instinct might be to skip the A3 row since you have nothing left. That is wrong.

A3 asks for: initial value (March vest date FMV), peak value (highest value between March and August while you held the shares), closing value (zero — which you fill as zero), and total gross proceeds from sale (the August sale proceeds). All four fields need to be filled even when the closing value is zero.

Same logic applies to the A2 account entry. Even if your Fidelity account had a zero balance on December 31 because you sold and withdrew everything, the account existed and held assets during the year. Disclose it with peak balance and closing balance of zero.

Dividends — Disclose in A3 and Tax in Schedule OS

Dividends received from foreign stocks are taxable in India under Schedule OS (Other Sources) at your slab rate. They also appear in A3 under "Total gross amount paid/credited with respect to the holding during the period."

If US withholding tax was deducted on the dividend (typically 25% under US domestic rules, reduced under the India-USA DTAA), you can claim a foreign tax credit by filing Form 67 under Rule 128. Form 67 must be filed before the ITR due date. The credit is limited to the Indian tax payable on the same dividend income — but it reduces your net outflow and should always be claimed when available.

The Penalty for Non-Disclosure

Section 41 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 imposes a flat penalty of Rs. 10 lakh per undisclosed foreign asset per assessment year. The amount of the asset is irrelevant to the penalty quantum. A Rs. 30,000 vested RSU holding that wasn't disclosed attracts exactly the same Rs. 10 lakh as a Rs. 3 crore one.

Additionally, Section 42 provides for prosecution — up to 7 years imprisonment — for wilful non-disclosure. The threshold for "wilful" is fact-dependent, but repeated omissions across multiple years strengthen that inference.

In practice, most non-disclosure cases are settled through penalty proceedings rather than prosecution. But the penalty alone — Rs. 10 lakh per asset per year — is significant for what is often an accidental omission by someone who simply didn't know Schedule FA existed.

Schedule FSI — One More Thing

If you received dividend income from foreign stocks, you also need to fill Schedule FSI (Foreign Source Income) in addition to Schedule FA. Schedule FSI captures the foreign income, the country it arose from, the foreign tax paid, and the credit claimed in India. It feeds into Schedule TR (Tax Relief) which reconciles the double taxation relief.

Many filers complete Schedule FA correctly but miss Schedule FSI for dividend income, which means the Form 67 credit claim is incomplete. All three — Schedule FA, Schedule FSI, and Form 67 — need to be consistent and filed together.