The Draft Income Tax Rules, 2026 propose sweeping changes to PAN-quoting norms, perquisite valuations and reporting requirements across financial, property and digital asset transactions. While the CBDT is expected to notify the rules by early March, taxpayers filing returns for AY 2026–27 will continue to use the existing forms and provisions under the Income Tax Act, 1961.
The updated Income Tax Rules are being formulated to give effect to the Income Tax Act, 2025, which will come into force from April 1.
The Draft Income Tax Rules for 2026 have introduced key changes to the requirements for quoting a Permanent Account Number (PAN) in various financial transactions in India. The Central Board of Direct Taxes (CBDT) is expected to notify the draft income tax rules by the first week of March, officials said on Monday. However, taxpayers filing income tax returns for the Assessment Year (AY) 2026–27 will continue to follow the existing return forms and provisions under the Income Tax Act, 1961.
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What are the key changes in the Draft Income Tax Rules 2026?
Cash deposits and withdrawals
Under the new proposals, the threshold for mandatory PAN quoting in cash deposits or withdrawals has been raised to Rs 10 lakh or more in a financial year, covering both single and multiple accounts held by an individual. This is a considerable shift from the current requirement, which mandates PAN quoting for any cash deposit exceeding Rs 50,000 in a single day with banking companies or cooperative banks. These revisions are expected to impact many individuals and businesses engaged in large-value transactions, providing flexibility while ensuring regulatory oversight of substantial money flows.
Purchase of motor vehicles
Requirements for quoting PAN in the purchase of motor vehicles have also been updated. Individuals buying a motor vehicle, including motorcycles, must now quote their PAN only if the price exceeds Rs 5 lakh. This changes the previous rules, where quoting PAN was obligatory for any motor vehicle purchase regardless of value, with no requirement for two-wheelers at all.
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Hotel bills
For hotel and restaurant payments, the PAN requirement threshold has been doubled to Rs 1 lakh, compared to the current Rs 50,000 limit. The revised rules also extend this requirement to payments made to convention centres, banquet halls, and event management professionals, reinforcing controls over high-value hospitality and event expenditures.
Immovable property transactions
For immovable property transactions, the draft guidelines have introduced a higher threshold for mandatory PAN quoting. Parties must now provide their PAN for any purchase, sale, gift, or joint development agreement involving property valued above Rs 20 lakh, replacing the earlier Rs 10 lakh limit. Additionally, the draft rules stipulate that PAN must be quoted to initiate any account-based relationship with an insurance company, regardless of annual premium amounts. Currently, this requirement applies only when total life insurance premium payments in a year exceed Rs 50,000.
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The changes reflect a broader policy approach to rationalising the PAN quoting thresholds. Sources emphasised that the intent is to focus on collecting only “relevant information” and on “leveraging tech-enhancements of reporting entities” under the Income Tax Act.
Tax-free perquisites
Additional provisions in the draft rules address tax-free perquisites provided by employers. The value of perquisites for official vehicles and free meals is proposed to be increased, reflecting current market realities. The perquisite value for free meals and non-alcoholic beverages provided by employers is set at Rs 200 per meal. For official motor vehicles, the monthly allowance is proposed at Rs 8,000 for cars with engine capacities below 1.6 litres and Rs 10,000 for larger vehicles, inclusive of driver allowances.
Crypto assets
The rules also extend reporting and due diligence obligations for crypto-asset service providers. Under the new proposals, crypto exchanges will be required to share transaction information with tax authorities, aligning crypto oversight with traditional financial institutions. In addition, Central Bank Digital Currency (CBDC) is now recognised as an accepted mode of electronic payment, integrating digital currency with established payment channels and supporting the government’s digital economy objectives.
House rent allowance
For those claiming house rent allowance (HRA), the list of Category 1 metropolitan cities has been expanded. Bengaluru, Pune, Ahmedabad, and Hyderabad join Delhi, Mumbai, Kolkata, and Chennai in this category, making it easier for residents of more cities to qualify for higher HRA benefits in line with their cost of living.
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The Central Board of Direct Taxes (CBDT) is expected to finalise the new rules following a period of stakeholder consultation. The new rules are being prepared to implement the Income Tax Act, 2025, which comes into effect on 1 April. These developments underscore the government’s focus on modernising tax compliance while adapting to technological and market changes.
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