The Draft Income Tax Rules 2026 have introduced major proposals aimed at revising PAN quoting requirements, enhancing reporting norms for crypto transactions, and updating several tax-related provisions. These rules are expected to modernise compliance and align with the upcoming Income Tax Act, 2025, which will come into force from April 1.
PAN Quoting Limits Proposed to Be Increased for Banking Transactions
One of the most significant changes in the draft rules is the sharp increase in transaction limits requiring a Permanent Account Number (PAN).
Under the proposal:
- PAN will be mandatory for cash deposits or withdrawals aggregating to ₹10 lakh or more in a financial year, across one or more accounts.
Currently, PAN is required when cash deposits exceed ₹50,000 in a single day with a bank or cooperative bank.
This change aims to reduce unnecessary reporting and focus on high-value transactions.
Revised PAN Requirements for Vehicle and Property Transactions
Motor Vehicle Purchases
The draft rules propose that PAN will be required only if:
- The cost of a motor vehicle exceeds ₹5 lakh
At present, PAN is mandatory for all motor vehicle purchases regardless of value, and two-wheelers are generally excluded. The proposed rules bring motorcycles under reporting if the value crosses the threshold.
Immovable Property Transactions
For transactions involving:
- Purchase
- Sale
- Gift
- Joint development agreements
PAN will be mandatory only if the transaction value exceeds ₹20 lakh, compared to the existing limit of ₹10 lakh.
Higher PAN Threshold for Hotel, Restaurant, and Event Payments
The draft rules also raise PAN requirements for hospitality and event-related expenses.
PAN will be compulsory when payments exceed ₹1 lakh for:
- Hotel and restaurant bills
- Convention or banquet hall payments
- Event management service providers
Currently, the threshold is ₹50,000.
PAN Mandatory for Insurance Account Relationships
Another key proposal is that PAN will now be required for:
- Initiating an account-based relationship with an insurance company
Previously, PAN was mandatory only when life insurance premiums exceeded ₹50,000 annually.
This move is expected to improve transparency in insurance-related financial dealings.
Expansion of Metro Cities for HRA Benefits
The draft rules expand the list of Category 1 metropolitan cities for claiming higher House Rent Allowance (HRA) exemptions.
New cities added include:
- Bengaluru
- Pune
- Ahmedabad
- Hyderabad
These join the existing metro list:
- Delhi
- Mumbai
- Kolkata
- Chennai
This change will benefit salaried taxpayers living in fast-growing urban centres.
Updated Values for Tax-Free Employer Perquisites
To reflect current market costs, the government has proposed revised valuations for employer-provided perquisites:
- Free food and non-alcoholic beverages: ₹200 per meal
- Official motor car allowances:
- ₹8,000 per month for cars below 1.6L engine capacity
- ₹10,000 per month for larger vehicles
(Includes driver-related costs)
New Crypto Reporting Norms and CBDC Recognition
A major highlight of the draft rules is the introduction of detailed compliance requirements for crypto-asset service providers.
Key proposals include:
- Mandatory reporting by crypto exchanges to the Income Tax Department
- Enhanced due diligence obligations for digital asset platforms
- Inclusion of Central Bank Digital Currency (CBDC) as a valid electronic payment mode
These measures aim to strengthen oversight in the growing digital asset economy.
Final Rules Expected by March 2026
According to Finance Ministry sources, the CBDT will finalise the rules after consultations with stakeholders and notify them by the first week of March.
The rules are being framed to operationalise the Income Tax Act, 2025, effective from April 1.
Officials clarified that the objective of raising PAN thresholds is to ensure that only significant transactions are tracked, while technology-driven reporting mechanisms handle compliance efficiently.
Conclusion
The Draft Income Tax Rules 2026 mark a major shift in tax compliance, focusing on higher-value reporting, simplified PAN requirements, expanded taxpayer benefits, and stronger regulation of crypto transactions. Once finalised, these changes will significantly impact individuals, businesses, and digital asset service providers.