New tax regime vs old regime for RSU holders in India (2026)
RSU holders face a unique tax regime decision: old regime allows HRA, 80C, and home loan deductions but the new regime has lower slab rates. Here's how to compare at different RSU income levels — with worked examples for ₹30L, ₹50L, and ₹1Cr+ earners.
Arnav GroverCo-Founder & Chief Product Officer, RoviaThe new tax regime (introduced in FY2020-21, made default from FY2023-24) offers lower slab rates in exchange for giving up most deductions. For salaried employees, this trade-off is straightforward when income is just base salary. For RSU holders, it's more complex — RSU perquisites are salary income that gets added to base salary, and that affects which regime wins.
This guide walks through the regime comparison specifically for Indian employees with US RSU grants.
The two regimes: rates at a glance (FY2026-27)
Old regime:
| Income slab | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5–5 lakh | 5% |
| ₹5–10 lakh | 20% |
| Above ₹10 lakh | 30% |
Plus: 4% health and education cess on tax payable. Surcharge applies at higher incomes (10% on ₹50L–₹1Cr; 15% on ₹1Cr–₹2Cr; 25% on ₹2Cr–₹5Cr; 37% on ₹5Cr+).
New regime (default from FY2023-24):
| Income slab | Rate |
|---|---|
| Up to ₹3 lakh | Nil |
| ₹3–7 lakh | 5% |
| ₹7–10 lakh | 10% |
| ₹10–12 lakh | 15% |
| ₹12–15 lakh | 20% |
| Above ₹15 lakh | 30% |
Plus: 4% cess. Surcharge applies (same structure as old, except 37% slab reduced to 25% under new regime).
Standard deduction: ₹75,000 under the new regime (increased from ₹50,000 in Budget 2024); ₹50,000 under the old regime.
What deductions are available under each regime
| Deduction | Old regime | New regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| Section 80C (ELSS, PPF, LIC, home loan principal) | Up to ₹1.5 lakh | Not available |
| Section 80D (health insurance premium) | Up to ₹25,000–₹50,000 | Not available |
| HRA exemption | Available (formula-based) | Not available |
| Home loan interest (Section 24b) | Up to ₹2 lakh (self-occupied) | Not available |
| NPS employer contribution (Section 80CCD(2)) | Available | Available |
| Leave Travel Allowance (LTA) | Available | Not available |
| Professional tax | Available | Not available |
| Section 80TTA (savings interest) | Up to ₹10,000 | Not available |
Key insight: NPS employer contribution (Section 80CCD(2)) is available under the new regime. This is the main deduction that survives and is worth maximising regardless of regime choice.
How RSU perquisites interact with regime choice
RSU vest perquisites are salary income — added to your gross salary before any deductions or regime comparison. They are not capital gains at vest. This has two implications:
- The perquisite is fully taxable at slab rates in whichever regime you choose
- The surcharge thresholds matter: a large vest event can push you into a higher surcharge bracket temporarily
The regime decision is annual. You choose old or new regime at the start of each financial year (via employer's Form 12BB declaration). You can switch between years.
You cannot choose old regime just for the capital gains portion. The regime applies to total income. LTCG from RSU sales is always taxed at 12.5% under Section 112, regardless of regime — it's a separate computation. STCG at slab rates similarly computes within whichever regime you choose.
Worked example 1: ₹30L salary + ₹15L RSU perquisite
Profile: Software engineer at Cisco India (Bangalore). Base CTC ₹30L (take-home, post-TDS). Annual RSU vest: CSCO shares worth ₹15L. No home loan. Pays rent in Bangalore (HRA eligible). 80C investments: ₹1.5L in PPF + ELSS.
Gross income: ₹45L (before standard deduction)
Old regime:
| Item | Amount |
|---|---|
| Gross income | ₹45,00,000 |
| Standard deduction | −₹50,000 |
| HRA exemption (assume ₹4L qualifying) | −₹4,00,000 |
| Section 80C | −₹1,50,000 |
| Section 80D | −₹25,000 |
| Taxable income | ₹38,75,000 |
| Tax at slabs | ₹10,21,875 |
| Cess at 4% | ₹40,875 |
| Total tax | ₹10,62,750 |
Surcharge: ₹38.75L is below ₹50L — no surcharge.
New regime:
| Item | Amount |
|---|---|
| Gross income | ₹45,00,000 |
| Standard deduction | −₹75,000 |
| Taxable income | ₹44,25,000 |
| Tax at new slabs | ₹9,37,500 |
| Cess at 4% | ₹37,500 |
| Total tax | ₹9,75,000 |
Verdict at ₹45L: New regime saves ~₹87,750. But if HRA exemption is larger or home loan interest is applicable, the old regime may pull ahead.
Worked example 2: ₹50L salary + ₹30L RSU perquisite
Profile: Senior engineer at Adobe India (Noida). Base CTC ₹50L. Annual RSU vest: ADBE shares worth ₹30L. Home loan in progress: ₹2L interest paid. Paying rent (HRA: ₹4L qualifying). 80C: maxed at ₹1.5L.
Gross income: ₹80L
Old regime:
| Item | Amount |
|---|---|
| Gross income | ₹80,00,000 |
| Standard deduction | −₹50,000 |
| HRA (₹4L) | −₹4,00,000 |
| 80C | −₹1,50,000 |
| Home loan interest (Section 24b) | −₹2,00,000 |
| 80D | −₹25,000 |
| Taxable income | ₹71,75,000 |
| Tax at slabs (30% above ₹10L) | ₹20,02,500 |
| Surcharge at 10% (income ₹50–₹1Cr) | ₹2,00,250 |
| Cess at 4% | ₹88,110 |
| Total tax | ₹22,90,860 |
New regime:
| Item | Amount |
|---|---|
| Gross income | ₹80,00,000 |
| Standard deduction | −₹75,000 |
| Taxable income | ₹79,25,000 |
| Tax at new slabs (30% above ₹15L) | ₹21,67,500 |
| Surcharge at 10% | ₹2,16,750 |
| Cess at 4% | ₹95,370 |
| Total tax | ₹24,79,620 |
Verdict at ₹80L: Old regime saves ~₹1,88,760 with this deduction profile. The home loan + HRA + 80C combination tips old regime ahead at this income level.
Worked example 3: ₹1Cr+ salary + ₹50L RSU perquisite
Profile: Principal engineer at NVIDIA India (Pune). Base CTC ₹1Cr. RSU perquisite: ₹50L. Home loan: ₹2L interest. HRA: ₹6L qualifying. 80C maxed.
Gross income: ₹1.5Cr
Old regime:
| Item | Amount |
|---|---|
| Gross income | ₹1,50,00,000 |
| Standard deduction | −₹50,000 |
| HRA | −₹6,00,000 |
| 80C | −₹1,50,000 |
| Home loan interest | −₹2,00,000 |
| 80D | −₹25,000 |
| Taxable income | ₹1,39,75,000 |
| Tax at 30% slab | ₹40,12,500 |
| Surcharge at 15% (₹1Cr–₹2Cr) | ₹6,01,875 |
| Cess at 4% | ₹1,84,575 |
| Total tax | ₹47,98,950 |
New regime:
| Item | Amount |
|---|---|
| Gross income | ₹1,50,00,000 |
| Standard deduction | −₹75,000 |
| Taxable income | ₹1,49,25,000 |
| Tax at new slabs (30% above ₹15L) | ₹43,42,500 |
| Surcharge at 15% (₹1Cr–₹2Cr) | ₹6,51,375 |
| Cess at 4% | ₹1,99,755 |
| Total tax | ₹51,93,630 |
Verdict at ₹1.5Cr: Old regime saves ~₹3,94,680. At very high incomes, the surcharge differential narrows but the absolute deduction value (₹10L+ claimed) makes old regime clearly better if deductions are substantial.
The break-even calculation
The new regime wins when the tax benefit from lower slabs exceeds the tax cost of losing deductions.
Approximate break-even deductions by income level:
| Total gross income | Break-even deductions (old regime wins above this) |
|---|---|
| ₹20–30L | ~₹2.5–3.5L total deductions |
| ₹30–50L | ~₹3.5–5L total deductions |
| ₹50–75L | ~₹5–7L total deductions |
| ₹75L–₹1Cr | ~₹7–10L total deductions |
| Above ₹1Cr | ~₹10L+ (HRA + home loan + 80C combined) |
Most RSU holders with a meaningful HRA, maxed 80C, and a home loan will find the old regime advantageous at incomes above ₹50L. Below ₹30L with fewer deductions, the new regime typically wins.
RSU-specific considerations
Timing mismatch: RSU perquisite income spikes in vest months. If vests are large and clustered (annual vesting like Cisco), a single month may push you into surcharge territory. The regime choice is based on full-year income, not monthly.
Surcharge on capital gains: LTCG from RSU sales (Section 112) is capped at a 15% surcharge under both regimes — the 25%/37% marginal surcharge does not apply to LTCG. This makes LTCG relatively more attractive at high incomes. STCG from RSU sales (slab rate) does carry full surcharge.
Advance tax and regime: Once you declare your regime choice to your employer at the start of the year, employer TDS is computed accordingly. If you switch regime at ITR filing, you may need to make additional advance tax payments.
Capital losses do not change the regime comparison: Losses from RSU share sales (STCG or LTCG) are set off against capital gains. They do not offset salary income (the RSU perquisite). The regime comparison applies only to salary income.
The NPS 80CCD(2) lever under new regime
Section 80CCD(2): Employer contribution to NPS is deductible under the new regime (up to 14% of basic salary from FY2024-25). This is the most powerful tax tool available to new regime adopters.
Example: If your employer contributes ₹2L/year to NPS on your behalf (common at companies like Cisco, Adobe, NVIDIA India), this ₹2L is deductible under the new regime, reducing your taxable income regardless of which regime you choose.
If your employer doesn't yet offer this, ask HR — it can be structured as part of CTC.
Which regime should RSU holders choose?
Old regime is likely better if:
- Total income above ₹50L AND you have HRA + 80C + home loan deductions totalling ₹7L+
- You have a large home loan (₹2L interest deduction has full value at 30% slab)
- RSU perquisite pushes you into surcharge territory — old regime deductions directly reduce the surcharge base
New regime is likely better if:
- Total income below ₹30L (simpler and usually cheaper)
- You rent but can't claim HRA (e.g., live with family), no home loan, and 80C is already funded through mandatory PF
- Your employer doesn't allow full 80C flexibility in CTC structure
Do the actual calculation every year. RSU vest amounts change each year. A year with a large vest may tip old regime ahead; a lean vest year may make new regime attractive. Use a tax calculator with actual numbers.
Related reading
- How RSU double-taxation works — the three tax events for RSU holders
- Advance tax quarterly calendar — managing advance tax under both regimes
- ITR-2 walkthrough for RSU holders — complete filing guide
- STCG/LTCG offset matrix — how capital losses interact with your tax regime
For employer-specific RSU guides: Adobe · Cisco · Google · NVIDIA · Salesforce · ServiceNow
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About the author
Co-Founder & Chief Product Officer, Rovia
IIT Bombay + IIM Calcutta. Founding PM at Aspora (largest NRI fintech). 6+ years covering Indian-resident US investing, LRS compliance, Schedule FA, and ITR-2 filing for AY 2026-27.
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