US Tax Filing and Compliance

Indian ESOP Taxation in the USA for NRIs & US Residents

By Ritesh Jain |Last Updated: November 8, 2025

Indian ESOP Taxation in the USA for NRIs & US Residents

As an NRI living in the United States, a green card holder, or a US tax resident, you must report your global income to the IRS. And this global income also includes any Employee Stock Option Plans (ESOPs) you have received from any Indian company(s).

Understand the tax implications of Indian ESOPs in the United States so that you can plan your taxes effectively. In this blog, we will talk about US taxation of Indian ESOPs in the United States, how you can avoid double taxation by using Form 1116, what you must respond to while filing your US tax return, and more, so that you can stay compliant with US tax laws.

Ritesh Jain(Tax Expert)

Mr. Ritesh has 20 years of experience in taxation, accounting, business planning, organizational structuring, international trade financing, acquisitions, legal and secretarial services, MIS development, and a host of other areas. Mr Jain is a powerhouse of all things taxation.

Frequently Asked Questions

Yes, NRIs residing in the USA might be subject to Indian ESOP taxation for NRIs in both India and the United States. However, the double taxation avoidance agreement treaty between India and the USA helps prevent actual double taxation, and you can claim the foregin tax credit in the US for the taxes you have already paid in the United States.

Report the fair market value at vesting as ordinary income on Form 1040, and then the gain or loss on sale as the capital gains on Schedule D/Form 8949. Additionally, if you have already paid the taxes in India, you can claim the FTC foregin tax credit on Form 1116 and avoid being taxed twice on the same income source.

Yes, Indian companies can issue employee stock options (ESOPs) to their employees overseas.

They are taxed at two stages, at the time of exercise (as a salary prerequisite)and then at the time of sale (as capital gains).

Indian ESOP Taxation in the USA for NRIs & US Residents

Frequently Asked Questions

Do NRIs pay tax in both India and the US on ESOPs?

How do I report an Indian ESOP in my US return?

Can Indian companies issue ESOP to overseas employees?

How are foreign ESOPs taxed in India?

Indian ESOP Taxation in the USA for NRIs & US Residents

Frequently Asked Questions

Do NRIs pay tax in both India and the US on ESOPs?

How do I report an Indian ESOP in my US return?

Can Indian companies issue ESOP to overseas employees?

How are foreign ESOPs taxed in India?