Draft Income Tax Rules have proposed significantly raising transaction limits for quoting of PAN for cash deposits/withdrawal in banks, purchase of motor vehicles and property, payment of hotel bills and other transactions.
The draft also proposes to raise the value of perquisites provided by employers, and to make it mandatory for crypto exchanges to share information with the tax department. It also includes Central Bank Digital Currency (CBDC) as an accepted mode of electronic payment.
The draft rules have also expanded the list of Category 1 metropolitan cities to include Bengaluru, Pune, Ahmedabad, and Hyderabad for the purpose of claiming house rent allowance (HRA). The current list includes New Delhi, Mumbai, Calcutta and Chennai.
The Central Board of Direct Taxes (CBDT) will finalise rules after stakeholder consultation and will notify them by the first week of March, the finance ministry sources said.
The Income Tax Rules are being finalised to give effect to the Income Tax Act, 2025, which will be implemented from April 1.
According to the proposed Income Tax Rule, 2026, quoting of Permanent Account Number (PAN) will be mandatory for making cash deposits or withdrawals aggregating to ₹10 lakh or more in a financial year, in one or more accounts of a person. At present, PAN is required for cash deposits exceeding ₹50,000 on any one day with a banking company or a cooperative bank.
In case of purchase of motor vehicles (including motorcycles), a buyer has to quote his/her PAN if the price exceeds ₹5 lakh. The current Income Tax Rules, 1962, do not provide for quoting of PAN for the purchase of two-wheelers, while for motor vehicles, it was mandatory irrespective of price.
In case of hotel/restaurant bills, payments made to convention centres or banquet halls or a person engaged in event management, PAN will be mandatory if the payment exceeds ₹1 lakh. The current IT Rules specify a ₹50,000 threshold for quoting PAN in case of hotel/restaurant bills.
Under the draft rules, PAN will be mandatory for starting an account-based relationship with an insurance company. Currently, payments aggregating to more than ₹50,000 in a financial year as life insurance premiums require a PAN.
Sources said the intent behind rationalising the PAN quoting threshold is to capture only “relevant information” and “leveraging tech-enhancements of reporting entities” under the Income Tax Act.
“These proposals reflect the tax department’s clear efforts to update the tax framework in line with today’s cost of living. They aim to ensure fairness across growing urban centres, improve transparency, and simplify compliance as the new Income Tax 2025 is rolled out,” Akhil Chandna, partner and global people solutions provider, Grant Thornton Bharat, told The Telegraph.