We have previously discussed why you should frequently sell your employer-granted RSUs (Restricted Stock Units). But the rules governing the proceeds from sale of the RSUs were archaic and cumbersome. I recently came across some regulatory changes that simplify the process for international investments. I believe these aren’t well-known, and I thought I should share.

First, a bit of background: ownership of RSUs and purchase of foreign equities are governed by two regulatory frameworks: the Foreign Exchange Management Act (FEMA) and the Liberalised Remittance Scheme (LRS). As these regulations relate to anti-money laundering, it’s always better to err on the side of caution when dealing with foreign investments.

Until last year, RBI guidelines indicated that money from the sale of employer-granted RSUs must be repatriated to India within 180 days. Even if you wanted to use that money to buy other foreign stocks or ETFs, you needed to first bring it back to India and then re-remit abroad, following the LRS process. This back-and-forth was not only a hassle but also costly due to the double conversion of foreign currencies.

In July 2024, RBI issued a new circular revising the guidelines (FED Master Direction No.15/2024-25), and providing a much-awaited respite. RSUs, and proceeds from their sale, are now considered as Overseas Portfolio Investments, and fall under the LRS. This means that directly reinvesting that money in other foreign stocks is now allowed within 180 days—no need to first bring it back to India. The new rules bring foreign dividend income too under LRS, allowing you to reinvest that as well.

You can now wire the RSU sale proceeds from your employer-provided broker’s account (Morgan Stanely, Fidelity, etc.) directly to the international bank account of your personal broker (Interactive Brokers, Vested, INDMoney, etc.), and use it to buy foreign stocks. No need to fill A2 forms, track SWIFT transactions, or pay hefty fee for international money transfers. A significant improvement, I say!