Amazon RSU India guide: the 5-15-40-40 back-weighted vesting, sign-on bonuses, and the Year 3 perquisite cliff

An L6 Senior SDE joined Amazon India in 2022. Their offer letter had a $600,000 RSU grant plus two cash sign-on bonuses — one in Year 1 (about $150,000) and another in Year 2 (about $100,000). The first two tax years felt manageable: cash sign-on bonus + base salary + a small first RSU vest at end of Year 1 (~$30,000 = Rs 25 lakh). Year 2 was similar — bigger sign-on bonus to compensate for still-small RSU vest ($90,000 = ~Rs 75 lakh).

Then Year 3 hit. The cash sign-on bonuses had ended. The RSU vest jumped from 15% of the grant to 40% of the grant — concentrated into four quarterly vests of 10% each. Total RSU perquisite for Year 3: ~$240,000 = ~Rs 200 lakh. Plus a refresh grant from the annual comp cycle. The engineer's total income for FY 2024-25 crossed Rs 2 crore for the first time, triggering the 25% surcharge band. Their previous-year advance-tax estimate was based on a still-modest equity vest. Section 234C interest on the under-payment was Rs 2.5 lakh.

This is the structural feature of Amazon equity comp that catches most engineers off-guard: the Year 3 perquisite cliff. Amazon's 5-15-40-40 back-weighted vesting schedule means your first two years are quiet on the equity side (offset by cash sign-on bonuses) and Years 3 and 4 are massive. Your tax-bracket planning needs to happen in Year 2, before the cliff lands.

This article is the Amazon-specific RSU guide. The structural tax framework lives in the 4-article RSU lifecycle series; this article fills in everything Amazon-specific — the back-weighted vesting schedule, the sign-on bonus structure (SOB1 and SOB2), the broker choice (Morgan Stanley StockPlan Connect or Fidelity NetBenefits — Amazon employees pick at onboarding), and the Year 3 cliff planning.

Amazon's grant types — RSU + Sign-on Bonus only

Amazon's equity structure is one of the cleanest among major US tech employers. There's no ESPP. There's no PSU. There's no employee stock purchase plan. Just:

Grant type	When	Vesting / payout
Initial RSU grant	At hire	5-15-40-40 over 4 years (vesting schedule below)
Annual Refresh RSU grant	Yearly post-Forte/performance review	Same 5-15-40-40 schedule starting from grant date
Sign-on Bonus 1 (SOB1)	Paid in Year 1 (typically quarterly)	Cash bonus; clawback if you leave before 1 year
Sign-on Bonus 2 (SOB2)	Paid in Year 2 (typically quarterly)	Cash bonus; clawback if you leave before 2 years
Special / Retention grants	Promotion or retention	Schedule varies

Critical: Amazon has never paid a dividend. AMZN does not distribute cash dividends — all returns are via share-price appreciation. This means no Form 44 FTC complication for dividends at any point in your Amazon tenure. The only Form 44 / 1042-S scenarios are if you somehow held dividend-paying shares from another employer in the same Amazon-affiliated brokerage account (rare).

Critical: Amazon has no ESPP. Unlike Microsoft (10% discount), Apple (15% + 6-month lookback), and NVIDIA (15% + 6-month lookback), Amazon employees don't have a stock purchase plan to track. The only equity perquisite events are the RSU vests on the back-weighted schedule.

The 5-15-40-40 vesting schedule

For every Amazon RSU grant (initial or refresh):

Year	% of total grant vested	Vest frequency
Year 1	5%	Single annual vest at end of Year 1
Year 2	15%	Single annual vest at end of Year 2
Year 3	40%	Quarterly vests (10% each quarter)
Year 4	40%	Quarterly vests (10% each quarter)

Years 1 and 2 are annual vests — a single event per year. Years 3 and 4 shift to quarterly disbursement, with 10% vesting at the end of each quarter.

For a $600,000 initial grant:

Vest event	Date (relative to grant start)	%	Value
Year 1 vest	End of Year 1	5%	$30,000
Year 2 vest	End of Year 2	15%	$90,000
Y3 Q1 vest	End of Year 3 Q1	10%	$60,000
Y3 Q2 vest	End of Year 3 Q2	10%	$60,000
Y3 Q3 vest	End of Year 3 Q3	10%	$60,000
Y3 Q4 vest	End of Year 3 Q4	10%	$60,000
Y4 Q1 vest	End of Year 4 Q1	10%	$60,000
Y4 Q2 vest	End of Year 4 Q2	10%	$60,000
Y4 Q3 vest	End of Year 4 Q3	10%	$60,000
Y4 Q4 vest	End of Year 4 Q4	10%	$60,000
Total over 4 years		100%	$600,000

The compounding with refresh grants. Annual refresh grants vest on the same 5-15-40-40 schedule starting from each grant date. By Year 3 of your tenure:

• Year 3 of your initial grant: 40% vest distributed across 4 quarters
• Year 2 of your Year-1 refresh: 15% single annual vest
• Year 1 of your Year-2 refresh: 5% single annual vest

In Year 3 you might also have Year 1 vesting from a third refresh grant if Amazon issued one to you mid-year. The compounding effect is real but the dominant contribution comes from the original initial grant entering its Year 3 (40%) phase.

Sign-on Bonus 1 and 2 — the cash side of the comp

To make total compensation competitive in Years 1 and 2 (when RSU vests are small at 5% and 15%), Amazon pays two cash sign-on bonuses:

Bonus	Year paid	Typical size	Clawback condition
Sign-on Bonus 1 (SOB1)	Year 1 (often paid quarterly across 12 months)	Roughly the cash-equivalent of the missing Year 1 RSU value	If you leave Amazon before completing 1 year, you owe a pro-rated repayment
Sign-on Bonus 2 (SOB2)	Year 2 (often paid quarterly across 12 months)	Smaller than SOB1, calibrated to keep Year 2 cash comp competitive	Pro-rated clawback if you leave before completing 2 years

India tax treatment of sign-on bonuses:

• Taxed as ordinary salary income at slab rate (no special bonus treatment)
• TDS deducted by Amazon India payroll on each bonus payment
• Reported on Form 16 as part of salary
• Subject to Section 89 relief if the bonus relates to multiple years and you'd be over-taxed by being concentrated in one year (rare in practice)

Clawback case: If you leave Amazon before 1 year and have to repay SOB1, the repayment generally doesn't reverse the tax already paid in the year of receipt. You'd claim the repayment as a deduction in the year of repayment under specific tax provisions — consult a CA for the exact mechanism. Most engineers who leave mid-year owe both the gross bonus back to Amazon and the tax to the government.

No India-side concern about SOB tax math is what makes it cleaner than RSU perquisite — the bonus is just standard salary, captured on Form 16, no SBI TTBR conversion needed (it's already paid in INR through Amazon India payroll).

Morgan Stanley StockPlan Connect or Fidelity NetBenefits — the broker choice

Amazon is unusual among major US tech employers in that employees can choose between two brokers at onboarding:

Option A: Morgan Stanley StockPlan Connect	Option B: Fidelity NetBenefits
stockplanconnect.morganstanley.com	netbenefits.fidelity.com
Equity-only platform	Combined platform with Amazon 401(k) + equity awards
Same UX as Google, Microsoft, Apple users	Same UX as some other Amazon-affiliated benefits
Standard 1042-S and 1099-B issuance	Standard 1042-S and 1099-B issuance
Account number: 9 digits	Account number: 10-11 digits

The choice is typically made during onboarding and is reversible later (you can transfer your account between providers, with some friction). For Indian residents, the choice doesn't materially affect tax treatment — both brokers issue 1042-S, both support W-8BEN, both allow international account holders.

For Schedule FA disclosure, the custodian name differs:

• Morgan Stanley: "Morgan Stanley Smith Barney LLC" at 1585 Broadway, New York, NY 10036
• Fidelity: "Fidelity Brokerage Services LLC" at 200 Seaport Blvd, Boston, MA 02210

If you opened with one provider, transferred to the other mid-year, and held shares in both during the same calendar year, file as two separate Schedule FA entries with the two different custodian names.

Practical difference for Indian filers: if you also have an Amazon 401(k) account (less common for India-resident employees but possible for transferees from US), Fidelity consolidates 401(k) + equity in one platform, making statement download simpler. If you have no 401(k), Morgan Stanley's equity-focused platform is slightly cleaner.

Statement download for Indian filing:

• Morgan Stanley: Login → Statements → Annual → Download PDF. Set calendar year (Jan 1 – Dec 31).
• Fidelity: Login → Documents → Tax Documents and Statements. The "Annual Statement" covers calendar year by default; explicitly verify.

Four-year worked example: an L6 SDE Indian engineer

This walks through a typical L6 (Senior SDE) Indian engineer who joined Amazon India in October 2022. The example shows the Year-3 cliff explicitly.

Year 1 (FY 2023-24): SOB1 + small RSU vest at year-end.

Assume initial RSU grant of $600,000 + SOB1 of $150,000 + SOB2 of $100,000 (paid in Year 2).

• Salary (base): assume Rs 40 lakh
• SOB1 (paid quarterly across Year 1): $150,000 = ~Rs 12.5 lakh per year (distributed quarterly)
• RSU vest (end of Year 1): 5% × $600,000 = $30,000 = ~Rs 25 lakh at TTBR ~Rs 83
• Total Year 1 perquisite + salary: Rs 40L + Rs 12.5L + Rs 25L = Rs 77.5 lakh

Tax at 30% slab + 10% surcharge (since >Rs 50L): ~Rs 24 lakh

Year 2 (FY 2024-25): SOB2 + bigger RSU vest at year-end.

• Salary (base): assume Rs 43 lakh (with annual merit)
• SOB2: $100,000 = ~Rs 8.4 lakh
• RSU vest (end of Year 2): 15% × $600,000 = $90,000 = ~Rs 75 lakh at TTBR ~Rs 84
• Annual refresh grant: assume $200,000 granted at Year-1 anniversary; vests 5% in its Year 1 (end of Year 2): $10,000 = ~Rs 8 lakh
• Total Year 2 perquisite + salary: Rs 43L + Rs 8.4L + Rs 75L + Rs 8L = Rs 134 lakh

Crosses Rs 1 crore → 15% surcharge applies. Tax: ~Rs 45-47 lakh.

Year 3 (FY 2025-26): THE CLIFF. RSU vest jumps to 40%, no more SOBs.

• Salary (base): assume Rs 46 lakh
• SOB ends — no more sign-on bonus
• Initial RSU grant Year 3 vest: 40% × $600,000 = $240,000, in 4 quarterly tranches of $60,000
  • Convert each at SBI TTBR on respective vest dates
  • Approximate total: $240,000 = ~Rs 202 lakh (at ~Rs 84 avg)
• Year-1 refresh grant ($200,000) Year 2 vest: 15% × $200,000 = $30,000 = ~Rs 25 lakh
• Year-2 refresh grant (assume $250,000 granted) Year 1 vest: 5% × $250,000 = $12,500 = ~Rs 10 lakh
• Total Year 3 perquisite + salary: Rs 46L + Rs 202L + Rs 25L + Rs 10L = Rs 283 lakh

Crosses Rs 2 crore → 25% surcharge kicks in. Total tax (including cess and surcharge stack): roughly Rs 105-115 lakh depending on exact slab brackets.

This is the Year 3 cliff. Compared to Year 2 (~Rs 46 lakh tax), Year 3 tax is roughly 2.3-2.5× higher — a single-year jump that catches many engineers by surprise.

Year 4 (FY 2026-27): Continued spike, no SOBs, multiple refresh grants.

• Salary: ~Rs 49 lakh
• Initial RSU Year 4 vest: 40% × $600,000 = $240,000 = ~Rs 202 lakh
• Y1 refresh Year 3 vest: 40% × $200,000 = $80,000 = ~Rs 67 lakh
• Y2 refresh Year 2 vest: 15% × $250,000 = $37,500 = ~Rs 31 lakh
• Y3 refresh grant (assume $300,000) Year 1 vest: 5% × $300,000 = $15,000 = ~Rs 13 lakh
• Total Year 4: Rs 49L + Rs 202L + Rs 67L + Rs 31L + Rs 13L = Rs 362 lakh

Tax: ~Rs 140-150 lakh.

The structural pattern: Year 3 and Year 4 are the peak earning years at Amazon. This is when you maximize income, max out tax-saving instruments (PPF, ELSS, NPS — though most are slab-limited), and consider tax-advantaged structures like HUF if applicable.

Advance tax planning for the cliff

Because the Year-3 jump is structural and predictable (you know it's coming from the day you sign the offer letter), advance tax planning should begin in Year 2:

Q1 advance tax installment (June 15): 15% of estimated annual tax. For Year 3, estimate based on the known 40% vest at projected AMZN prices.

Q2 installment (September 15): Cumulative 45% paid.

Q3 installment (December 15): Cumulative 75% paid.

Q4 installment (March 15): Full 100%.

If you under-pay in early installments, Section 234C interest at 1% per month for each shortfall installment kicks in at year-end. For a Rs 100 lakh tax liability with major under-payment in Q1, 234C interest can easily be Rs 3-5 lakh — a meaningful avoidable cost.

Recommended approach: model your Year 3 income using current AMZN share price (don't assume optimistic appreciation), compute the indicative advance-tax installments, and pay slightly above the estimate. Excess goes into the year-end refund; under-payment triggers 234C.

Form 16 + AIS reconciliation — Amazon India specifics

Amazon's India entities (Amazon Development Centre (India) Pvt Ltd; Amazon Seller Services Pvt Ltd; Amazon Internet Services Pvt Ltd for AWS; etc.) handle payroll TDS for India-resident employees:

Item	Where it appears
Base salary + SOB	Form 16 Part B Section A: gross salary
RSU vest perquisite	Form 16 Part B Section B(1)(b): "Value of perquisites"
TDS on salary + SOB	Form 16 Part A (monthly)
TDS on RSU perquisite	Form 16 Part A (in the month following each vest)
Detailed perquisite breakdown	Form 12BA, attached to Form 16

SOB tax timing: Amazon India typically pays SOB1 and SOB2 in quarterly installments rather than as lump sums, spreading the tax impact across the year. Form 16 reflects the cumulative annual SOB amount as part of salary.

RSU TDS: Amazon India payroll calculates TDS on the perquisite portion using the SBI TTBR on the vest date. The TDS is deducted in the month following the vest — so a December vest results in TDS deduction from January's salary.

AIS quirks: Amazon RSU vests should appear as "Perquisite from employer" in AIS, aggregated with other salary items. The vests should NOT appear separately as US-source income — if you see that, it's a 26AS misclassification (typically because Amazon's parent company filed something that flowed through to Indian AIS).

Schedule FA for Amazon.com, Inc.

For each calendar year when you held AMZN shares:

Field	Value for Amazon
Country	2 (United States of America)
Name of Entity	Amazon.com, Inc.
Address of Entity	410 Terry Avenue North, Seattle, WA 98109, USA
Nature of Entity	Foreign Listed Company
Date of Acquisition	Earliest vest date of currently-held shares
Initial Value (INR)	Cost basis at acquisition (vest-date TTBR × shares × price)
Peak Value (INR)	Highest market value during calendar year × TTBR
Closing Value (INR)	Dec 31 value × Dec 31 TTBR
Total dividends received (INR)	Rs 0 (Amazon doesn't pay dividends)
Total sale proceeds (INR)	If you sold
Custodian	Morgan Stanley Smith Barney LLC or Fidelity Brokerage Services LLC (whichever broker you chose)
Custodian Address	Morgan Stanley: 1585 Broadway, NY 10036; Fidelity: 200 Seaport Blvd, Boston, MA 02210
Account Number	9 digits (Morgan Stanley) or 10-11 digits (Fidelity)

Single entry for AMZN — there's only one share class.

If you've switched brokers mid-year, file two Schedule FA entries — one for each custodian, covering the period when shares were with that broker.

Zero dividends — the dividend field is just Rs 0. Don't leave it blank (Schedule FA validation may flag); explicitly enter Rs 0.

Six common filing errors for Amazon employees

1. Under-estimating Year 3 advance tax. The most expensive error. If your Year-2 advance tax was based on Year-2-level RSU vests, your Year-3 advance tax estimate must include the 40% vest jump. Section 234C interest on a Rs 50+ lakh shortfall can be Rs 3+ lakh.

2. Treating SOB1/SOB2 as RSU perquisite. SOBs are salary, not perquisite. They appear on Form 16 in the salary section, not the perquisite section. Filing them under Section 17(2) instead of Section 17(1) is technically wrong (though tax math is the same).

3. Missing the broker choice in Schedule FA. If you chose Fidelity, the custodian name is "Fidelity Brokerage Services LLC" — not "Morgan Stanley Smith Barney LLC." Many filing templates default to Morgan Stanley.

4. Trying to claim Form 44 FTC when Amazon paid no dividend. Amazon has never paid a dividend. There's no US WHT to credit. If your filing template has a Form 44 field auto-filled with $0, that's fine — just don't file an unnecessary Form 44.

5. Misunderstanding clawback timing on SOB. If you leave Amazon mid-Year-1 after receiving SOB1, you may owe pro-rated repayment to Amazon. The tax already paid on the bonus doesn't automatically come back — you claim the repayment as a deduction in the year of repayment under specific provisions. Don't confuse this with a refund.

6. Sell-to-cover proceeds confused with sales. When Morgan Stanley or Fidelity sells shares at each vest to cover US tax withholding, that sell-to-cover is not a separate Schedule CG sale event. It's a transactional detail of the vest, already captured by the gross vest value entered as perquisite.

RSU concentration — and what to do about it

By Year 4 at Amazon, the typical L6+ engineer holds 40-60% of their liquid net worth in AMZN stock. This is similar to Microsoft and Meta concentration levels but with the additional wrinkle that the bulk of the equity accumulates in Years 3 and 4 (versus more even accumulation at Google/Microsoft).

The standard Morgan Stanley StockPlan Connect or Fidelity NetBenefits account doesn't let you diversify within the same account — you can hold AMZN, sell and convert to USD cash, or remit the proceeds. The sell-and-remit path triggers separate LRS + FEMA considerations and converts the asset out of the foreign-equity bucket.

Rovia is built specifically for this problem. Transfer your vested Amazon shares from Morgan Stanley or Fidelity directly to Rovia (in-kind transfer, no taxable event), then redeploy into diversified US ETFs or other single stocks while keeping the assets in the foreign-equity bucket and the original LRS treatment intact.

Next steps

For filing your Amazon RSU income:

1. How RSU double-taxation actually works — the 3-event framework
2. Reading your Morgan Stanley StockPlan Connect statement — field-by-field translation (Morgan Stanley walkthrough; most concepts transfer to Fidelity)
3. From vest to ITR-2: the complete 12-step workflow — execution layer
4. RSU vesting while in US vs India — if you transferred from Seattle / Bay Area back to India
5. Schedule FA disclosure guide — Schedule FA deep dive
6. Schedule FA wizard — upload your Morgan Stanley or Fidelity PDF, get INR-converted Schedule FA + capital gains schedule in CSV. Free for V1.

Other employer-specific guides in this series:

• Google (Alphabet) RSU India guide — the 33-22-25-20 vesting split
• Microsoft RSU India guide — On-Hire + ASAs + ESPP at 10%
• Meta RSU India guide — Schwab, PSU performance multipliers
• Apple RSU India guide (in progress) — semi-annual vests, ESPP at 15% with 6-month lookback
• NVIDIA RSU India guide (in progress) — Schwab, quarterly vest, PSU appreciation

This article reflects Amazon's 2024-2026 grant practices. The 5-15-40-40 vesting schedule applies to standard RSU grants; specific grants (retention, promotion) may have different schedules — verify against your grant memo. We refresh this guide annually after each Budget; the framework holds across rate and policy changes.