The government has unveiled the draft Income Tax Rules, 2026, proposing wide-ranging changes to PAN compliance norms, reporting requirements and digital payment recognition, in a key step towards implementing the new Income Tax Act, 2025. Issued by the Central Board of Direct Taxes (CBDT) on February 7, the draft rules have been opened for public consultation. The final framework is expected to be notified by early March, paving the way for the new tax regime to take effect from April 1, 2026.
Higher PAN Thresholds Across Transactions
One of the biggest proposed shifts is a sharp increase in the monetary thresholds where quoting PAN will be mandatory. Under the draft rules, PAN must be quoted for cash deposits or withdrawals aggregating to Rs 10 lakh or more in a financial year across one or multiple bank accounts. Currently, PAN is required only when cash deposits exceed Rs 50,000 in a single day. For motor vehicle purchases, PAN will be required only if the transaction value exceeds Rs 5 lakh.
This marks a shift from the existing system where PAN is mandatory for all four-wheeler purchases regardless of price, while two-wheeler purchases do not currently require PAN quoting. The hospitality and events sector will also see relaxed thresholds. PAN will be required for payments exceeding Rs 1 lakh towards hotel or restaurant bills, banquet bookings, convention centres or event management services. At present, PAN is mandatory for such transactions above Rs 50,000.
Insurance, Perquisites And Digital Assets
Property transaction rules are also set to change. The draft proposes doubling the threshold for quoting PAN in immovable property deals, including purchase, sale, gifts and joint development agreements, from Rs 10 lakh to Rs 20 lakh. The draft rules also propose making PAN mandatory for starting any account-based relationship with insurance companies. Currently, PAN is required only when total annual payments, including life insurance premiums, exceed Rs 50,000.
The government has also proposed increasing the tax-free valuation limits of certain employer-provided perquisites such as meals and official transport benefits. In a move aimed at strengthening tax tracking in emerging financial sectors, the draft mandates crypto exchanges to share user transaction details with the Income Tax Department.
Consultation phase underway
Additionally, the rules formally recognise Central Bank Digital Currency (CBDC) as an accepted mode of electronic payment under tax regulations, signalling deeper integration of digital currency into the financial ecosystem. The CBDT has invited stakeholders, industry players and taxpayers to submit feedback on the draft rules and related forms before they are finalised. The rules will operationalise the Income Tax Act, 2025, part of the government’s broader push to simplify tax compliance, expand the digital tax base and reduce litigation, when it comes into force from April 1, 2026.
