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Sell RSU and ESPP in India [with Purpose Code] - Maximize Return

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Optimizing the sale of Restricted Stock Units (RSUs) and Employee Stock Purchase Plans (ESPPs) from foreign brokerages demands a strategic and comprehensive approach. This OpenGenus guide, tailored for Indian residents, provides insights and strategies to maximize returns while efficiently managing costs, including GST charges. Additionally, we'll explore the significant advantages of leveraging indexation in the context of RSU and ESPP transactions.

Table of contents:

  1. Unified Strategy: Navigating the Market with Limit Orders and ESPP Considerations
  2. Costs Incurred in Selling: Choosing the Right Brokerage and Managing Charges
  3. Example of selling cost
  4. Leveraging Indexation Benefits in RSU and ESPP Transactions
  5. Purpose Code for RSU and ESPP
  6. Things to Remember: Prioritizing PSU Banks and Navigating GST Charges

Unified Strategy: Navigating the Market with Limit Orders and ESPP Considerations

Executing a sell order requires a thoughtful approach. Opt for Limit orders to exert control over the selling price, especially during periods of low trading volume. Understanding the nuances between Market and Limit orders is key. This strategic move ensures precision in execution and maximizes returns. Simultaneously, when dealing with ESPPs, factor in the specificities of these plans. Understand the vesting period and taxation rules associated with ESPPs. Determine the optimal time to sell, considering potential tax implications and market conditions.

Costs Incurred in Selling: Choosing the Right Brokerage and Managing Charges

Selecting a brokerage account wisely is crucial. Foreign brokers often charge flat fees for wiring funds to India. To minimize costs, consider transferring funds to your brokerage account and initiating wire transfers manually. Costs to consider include:

  • Brokerage Fees: For example, E*TRADE may impose a $25 fee per wire transfer.
  • Inward Remittance Charges: While ICICI and HDFC banks may not charge fees, others could, impacting the overall transaction cost.
  • Conversion Rates: Balancing fees with conversion rates ensures a cost-effective transaction.
    • HDFC Bank: Conversion cost at a rate of 81.89 (example).
    • SBI: Conversion cost at a rate of 82.78 (example).
    • If your amount is significant, this can create a valuable difference.

If you bank is SBI, search for the conversion rate on Google Search as:

Forex rate card SBI

This will bring up a PDF file with a table listing the conversion rate for a wide range of currency. If you are dealing with USD, check the TT Buy rate for USD.

TT Buy refers to "Inward Remittance".

See the PDF files (the links may vary time to time so search and get the latest):

  • Forex rate card for SBI

  • Forex rate card for HDFC

  • GST Charges: Anticipate and account for GST charges that apply to currency conversion within specified slabs.

    • Upto Rs. 1 lakh: 0.18% of ACE (Amount of Currency Exchanged), with a maximum GST of Rs. 180.
    • Between Rs. 1 lakh and up to Rs. 10 lakh: INR 180 + 0.09% of ACE, with a maximum GST of Rs. 990.
    • Above Rs. 10 lakh: INR 990 + 0.018% of ACE, with a maximum GST of Rs. 10,800.

Example of selling cost

Let's consider an example where you have $10,025 in RSUs, and you want to sell and transfer it to your HDFC and SBI banks:

  • For HDFC:
    • Etrade fee: $25, Final value: $10,000
    • Converted value: 10000 * 81.89 = 818900
    • GST = INR 180 + 737.01 = INR 917.01
    • Final value = INR 8,17,982.99
  • For SBI:
    • Etrade fee: $25, Final value: $10,000
    • Converted value: 10000 * 82.78 = 827800
    • GST = INR 180 + 737.01 = INR 917.01
    • Final value = INR 8,26,882.99

Money extra gained in SBI due to better forex rate at Public Sector Banks = INR 8,900

Sell wisely.

Leveraging Indexation Benefits in RSU and ESPP Transactions

Indexation plays a pivotal role in optimizing returns and minimizing tax liabilities on long-term investments, including RSUs and ESPPs. By adjusting the purchase price of the underlying assets against the rate of inflation, indexation allows investors to realize higher gains while factoring in the impact of inflation.

In the context of RSUs and ESPPs, where long-term capital gains are a significant consideration, indexation can substantially reduce tax liabilities. Consider consulting with a financial advisor to understand how indexation can be leveraged to enhance returns and optimize the tax efficiency of your RSU and ESPP transactions.

Purpose Code for RSU and ESPP

Provide standing instructions to your bank, specifying the purpose code as P0021 for RSU and ESPP sales.

This ensures a smooth transaction process, minimizing delays and complications. Note this transaction can be done on a Savings Account. It has been reported that bank employees may attempt to trick you to open a Current Account to get the inward remittance for RSU and ESPP.

Ensure the purpose code is P0021 and not P0001. By default, P0001 may be provided by the brokerage account but need to contact your bank to update this.

Things to Remember: Prioritizing PSU Banks and Navigating GST Charges

When it comes to wire transfers, prioritize Public Sector Undertaking (PSU) banks. Their favorable Telegraphic Transfer Buying Rates (TTBR) for inward remittance can significantly impact the final payment.

Additionally, be aware of GST charges that apply to currency conversion within specified slabs. Anticipating and accounting for these charges is crucial for a transparent and hassle-free transaction.

By integrating these strategies and considerations, including the powerful concept of indexation, into your RSU and ESPP selling process, you can navigate the intricacies of foreign brokerage transactions with confidence, ensuring optimal returns and minimal headaches.

Devansh Biswal

Writer at OG, 3rd year B. Tech student at Veer Surendra Sai University of Technology, Burla. Working hard day and night to get placed at Google.

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Anjali gautam
Sell RSU and ESPP in India [with Purpose Code] - Maximize Return
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