Sell RSUs Before or After Moving Back to India? The 2026 RNOR, DTAA, and Form 67 Playbook

Every month someone on r/nri or Blind asks whether to liquidate RSUs before the flight or after landing. The confusion comes from mixing two tax layers. The vest is wage income, sourced to where you worked while earning it. The gain after vest is investment income, sourced to where you live when you sell. Most guides answer only the gain layer or only the wage layer; the sell-before-or-after question only resolves once you separate them, and only then does the US-nonresident plus India-RNOR overlap show up as genuinely zero tax on the gain in both countries. Separate those layers and the before-or-after question mostly answers itself.

Will I even qualify for RNOR when I move back?

Check this first; the whole sell-after strategy depends on it. RNOR is a substatus of residency, so the order matters: you first have to be a resident under Section 6(1) of India's Income-tax Act, then fail the ordinary-residence tests in Section 6(6). If you are not a resident under 6(1) at all, you are a non-resident (NR), which is also favorable for foreign gains. If you are a resident, you are Resident but Not Ordinarily Resident (RNOR) rather than Resident and Ordinarily Resident (ROR) in a year when either Section 6(6) test holds:

• You were a non-resident of India in 9 of the 10 preceding years, or
• You were in India 729 days or less across the 7 preceding years.

A returnee with 7 to 10 unbroken US years on F1 plus H1B usually gets roughly 2 to 3 assessment years of RNOR. Short-stint returnees are the ones surprised: 4 years on F1 and OPT fails the 9-of-10 test, so everything rides on the 729-day count. Cross 729 days and you land directly in ROR status, with no tax-free window at all.

Return-date timing matters too. India's tax year runs April 1 to March 31, and Section 6(1) makes you resident with 182 or more days in India that year, or 60 or more days plus 365 across the preceding four years. Land late enough in the fiscal year to stay under those counts and the arrival year stays non-resident, stretching your RNOR runway by a year. Run your exact dates through Section 6 before booking flights.

Is it really zero capital gains tax in both countries if I sell during RNOR?

Yes, on the appreciation layer. It is not a loophole, just two mainstream rules overlapping.

• US side: a nonresident alien is taxed only on US-source and effectively connected income (IRS Publication 519), and IRC 865(a) sources a nonresident's stock sale gains outside the United States. Once your tax home is in India, the gain is outside US federal capital gains tax.
• India side: the proviso to Section 5(1) keeps income accruing outside India out of an RNOR's total income unless it comes from a business controlled in or profession set up in India. Gains on US company shares sold while RNOR are foreign-sourced and generally outside Indian tax.
• State side: California's FTB Publication 1004 sources post-vest appreciation to your state of residence at the sale. A non-resident of California owes nothing on the gain layer.

The traps:

• The 183-day trap. Under IRC 871(a)(2), a nonresident alien present in the US 183 days or more in the taxable year pays a flat 30% tax on US-source capital gains. The departure year is dual-status, US residency runs through December 31 by default (ending it earlier requires a closer connection to India plus a statement to the IRS), and the substantial presence test counts one third of last year's days and one sixth of the year before. Clean play: sell in the first full calendar year you are a nonresident alien throughout.
• Indirect transfer edge case. India can reach gains on foreign shares deriving substantial value from Indian assets; small portfolio holders are generally carved out, so this rarely bites RSUs in a US employer.

The India-side pieces here (the Section 5(1) proviso and the rates further down) rest on statute that moves with each Finance Act. Confirm the current text with a cross-border professional before you act on the zero-tax conclusion.

My RSUs keep vesting after I land in India. Which country taxes the trailing vests?

Both, in slices set by workdays, not by where you sit on vest day.

Treasury Regulation 1.861-4(b)(2)(ii) sources compensation to the US in the ratio of US workdays to total workdays over the earning period, and for multi-year equity that period runs from grant to vest. A post-move vest is therefore partly US-source and reportable on Form 1040-NR even after you become a nonresident alien.

A worked example: granted March 2023 in San Francisco, moved to Bengaluru in early 2026, and a tranche worth $100,000 vests in March 2027. The split is US workdays divided by total workdays over the whole grant-to-vest period, not a calendar-year shortcut. If roughly three-quarters of your workdays in that window fell in the US, about $75,000 is US-source wage income on your 1040-NR and about $25,000 relates to services rendered in India. Count actual workdays; a whole-year proxy skews the ratio whenever you move mid-year or travel heavily.

The India-US treaty backs the split: Article 16(1) lets the country where the employment was exercised tax the remuneration, and the Article 16(2) exemption fails for a trailing vest paid by a US employer for former US workdays.

Here is the mechanics trap consumer software cannot handle. On a 1040-NR you report only the US-workday portion of the vest. If your employer's W-2 over-reports US wages (the whole $100,000 instead of the $75,000 workday slice), you correct it by taking a treaty-based return position under DTAA Article 25 and IRC Section 894, which means attaching Form 8833 to a paper-filed 1040-NR. TurboTax and other consumer software cannot e-file this, which is why the double-taxed slice trips people up every filing season.

On the India side, Section 17(2)(vi) taxes employer equity as a salary perquisite at allotment, valued at fair market value minus anything paid, with employer TDS under Section 192. Section 9(1)(ii) treats salary as India-source only when earned for services rendered in India, the statutory basis for prorating an RNOR's perquisite.

California adds its own claim: FTB 1004 taxes a nonresident's restricted stock income by California workdays over total workdays from grant to vest, so moving to India before the vest does not strip California's share of the wage layer. Trailing state tax and layoff mechanics: see RSU taxes on an H1B visa.

Should I sell my RSUs before leaving the US or after arriving in India?

The wage layer is not a decision; every vest is taxed by workday sourcing regardless of timing. The gain layer is the choice:

• Sell after, during RNOR, when the embedded gain is large. A $150,000 gain sold as a US nonresident alien and Indian RNOR is untaxed in both countries; sold a year earlier as a California resident, it is taxed federally and by California.
• Sell before, when the gain is small or negative. Little appreciation means little saved by waiting, and a plain domestic sale avoids dual-status and broker complications.
• Sell before, if you will keep heavy US presence. At 183 or more US days in the sale year, the after-move sale loses its US-side benefit.
• Respect market risk. The window saves tax only on gains that still exist when you sell; holding a concentrated position 12 to 18 extra months is a bet. Many people sell enough before departure to de-risk and let the rest ride.

This calculus is for RSU shares you already own. ISOs carry a 3-month post-employment exercise limit and AMT exposure; see ISOs, AMT, and leaving the US.

I am moving back with seven figures in RSUs. What is the order of operations?

Here is the sequence most large-position returnees should run, in order:

1. Confirm RNOR eligibility. Run the Section 6(6) tests before anything else; the whole plan collapses if you land straight in ROR.
2. Time the landing date. Where you can, arrive late enough in India's April-to-March year to stay non-resident for the arrival year, which adds a year of RNOR runway.
3. De-risk the concentrated position before departure. A seven-figure single-stock holding is market risk, not a tax position. Sell enough while still in the US to sleep at night, and let the tax-timed remainder ride.
4. Open an India-friendly broker while still US-resident. Account arrangements are far easier before your address changes; line up a broker that keeps non-US residents before you need it.
5. Run the sell-and-rebuy reset during RNOR. Step up basis on the shares you keep while the gain is untaxed in both countries.
6. Handle trailing vests with the workday split and Form 67. Report the US-workday slice on the 1040-NR, claim the India credit through Form 67, and keep per-tranche records.
7. Treat 401k and US estate-tax exposure as separate workstreams. They do not fit the RSU sequence and this post does not cover them; plan them alongside, and for green card holders the US exit tax guide covers the departure mechanics.

How does the sell-and-rebuy cost basis reset work during RNOR?

This is the move r/nriFIRE "roast my R2I plan" posts describe, and it is legitimate.

India gives no basis step-up when residency changes. Once ROR, India taxes worldwide gains from your original cost. Under the Finance (No. 2) Act 2024, long-term gains on unlisted and foreign shares transferred on or after July 23, 2024 are taxed at 12.5% without indexation, with a 24-month holding period for long-term status. Verify the current Finance Act before selling; rates move.

The reset: while RNOR, sell the appreciated shares and immediately buy them back. The gain is outside both US and Indian tax per the rules above, and your basis steps up to market.

Numbers: vested shares with a $200,000 basis (the vest-date value already taxed as salary) now worth $350,000.

• Sell and rebuy during RNOR: the $150,000 gain goes untaxed in both countries; new basis $350,000.
• Skip the reset and sell as ROR: India taxes the full $150,000 at 12.5%, roughly $18,750, plus applicable surcharge and cess.

Three cautions. The US wash-sale rule (IRC 1091) disallows only losses repurchased within 30 days; nothing blocks realizing a gain and rebuying immediately. Finish the reset before your first ROR year begins, because once ROR the same trade is fully taxable. And the rebuy restarts the 24-month holding clock, so shares you rebuy late in the RNOR window and then sell soon after becoming ROR can be short-term, taxed at slab rates instead of the 12.5% long-term rate.

The US taxes January to December but India taxes April to March. How does Form 67 handle the mismatch?

A February 2027 trailing vest sits in US tax year 2027 but Indian FY 2026-27 (AY 2027-28). The mapping rule is Rule 128(1): India allows the foreign tax credit in the year the corresponding income is offered to tax in India, proportionately across years if the income spans several. Map the US tax to the Indian year in which that specific income lands, not to the US return it appeared on.

The working pieces:

• Form 67 is mandatory and online-only. You generally must file Form 67 to claim the credit, and the safe practice is to file it on time; do not count on missing it. Some tribunals have allowed the credit despite a late or absent Form 67 on the view that the requirement is procedural, but that is appeal-stage relief, not something to plan around.
• The credit hook is treaty Article 25(2)(a): India allows a deduction equal to US income tax paid, capped at the Indian tax attributable to the doubly taxed income. Excess US tax is not refunded by India.
• Currency conversion: foreign tax converts to INR at the SBI telegraphic transfer buying rate on the last day of the month before the month the tax was paid or deducted.
• Deadline: the e-filing portal's user manual frames Form 67 as due by the Section 139(1) return due date, while Rule 128(9) as amended in 2022 permits filing up to the end of the assessment year for timely-filed returns. File it before or with the return and skip the debate.

Where the numbers go in the return, which answers the recurring "FSI, FA, or both" question: report the doubly taxed foreign income in Schedule FSI, claim the credit in Schedule TR, and disclose the asset in Schedule FA once you are ROR. FSI and TR carry the credit in the years the income arises; FA is asset disclosure that starts only in your first ROR year; Form 67 goes in before or with the return. Use the applicable return, ITR-2 for most filers or ITR-3 if you have business income, and keep vest confirmations, the W-2 or 1040-NR, and per-tranche withholding statements, because you are attributing specific dollars of US tax to specific Indian-year income.

My employer withheld India TDS on the full vest even though I am RNOR. Is that right?

The classic intra-company transferee complaint: payroll declares the whole vest India salary and a large flat TDS shows up in TRACES, even though most of the vesting period was US workdays.

Law and practice diverge. Section 9(1)(ii) supports excluding the US-workday portion of an RNOR's perquisite, but payroll teams often apply ROR rules to everyone and withhold Section 192 TDS on the full vest, leaving you to fix it at return time. Tribunal decisions have supported prorating equity perquisites by India workdays; treat that as a documented filing position taken with a professional, not a payroll default.

Your options, in order: ask payroll to prorate before the vest, armed with grant dates, your move date, and a workday calculation (some mobility teams will; many will not). Failing that, offer only the India-source slice in your return, claim the excess TDS as a refund, and keep grant letters, vest schedules, and travel records ready for a notice. The fallback, offering the full amount and claiming Form 67 credit for the US slice, usually leaves money on the table. Withholding is a cash-flow event, not a determination of what you owe.

What about W-8BEN, dividends, and my broker closing my account?

W-8BEN. Once you are a nonresident alien, give your broker Form W-8BEN as the foreign beneficial owner, replacing the W-9: notify the withholding agent within 30 days of the change, and the form stays valid through the last day of the third succeeding calendar year. W-8BEN governs withholding on investment payments; it does nothing about your RSU vest, which is wage income handled through payroll, so tax deducted at vest despite a W-8BEN is not an error.

Dividends. Treaty Article 10(2)(b) caps US withholding on dividends paid to an Indian-resident portfolio investor at 25% of the gross dividend. While RNOR, foreign dividends generally stay outside Indian tax under the Section 5(1) proviso. Once ROR, India taxes them and the US withholding becomes a Form 67 credit claim.

Broker logistics. The strategy dies if the account closes when your address changes. Fidelity's published policy: no new accounts for non-US residents; existing customers who move abroad keep accounts but cannot purchase mutual funds (since August 1, 2014), and customers in certain countries may be limited to selling holdings and withdrawing proceeds. Other brokers range from purchase restrictions to closure and policies change; get yours in writing before the move, and transfer to an India-friendly broker while still in the US if needed.

If your stack includes ESPP shares or early-exercised founder stock, those layers have their own relocation rules; see ESPP and 83(b) elections on a visa.

Does this playbook work for green card holders and US citizens?

No. The strategy rests on becoming a US nonresident alien, and citizens and green card holders stay US tax residents on worldwide income until the status itself ends.

For green card holders, ending the status has its own gate: the IRC 877A exit tax on long-term residents. In 2026 you are a covered expatriate if your net worth is $2 million or more, your five-year average annual net income tax exceeds $211,000, or you fail to certify five years of tax compliance on Form 8854. Covered expatriates face a deemed sale of assets, including unsold RSU shares, with a $910,000 gain exclusion; a tech professional holding appreciated equity hits the $2 million line fast. The 8-year long-term resident clock and the planning sequence are in our guide to the US exit tax for green card holders moving back to India.

An H1B or L1 returnee who never held a green card owes no exit tax, which is exactly why this playbook works best for visa holders.

Plan the sale before you book the flight

A few months of timing here can move five or six figures of tax, and the answer depends on your grant dates, travel calendar, broker, and two filing calendars. Lesser does flat-fee cross-border tax planning and filing for NRIs and immigrant tech professionals: equity compensation, departure-year planning, and India-US double taxation, including RNOR sequencing, trailing-vest splits, and Form 67. If you want this mapped to your actual numbers, start at lesser.tax.