Draft Income Tax rules propose higher PAN thresholds, new crypto reporting regulations

The Draft Income Tax Rules have proposed increasing the transaction limits for quoting PAN for cash deposits and withdrawals in banks, buying cars and real estate, and paying hotel bills.

According to the proposed Income Tax Rules, 2026, cash deposits or withdrawals totalling Rs 10 lakh or more in a fiscal year across one or more of an individual's accounts will require the submission of a PAN. Currently, cash deposits with a banking corporation or cooperative bank that exceed Rs 50,000 in a single day require a PAN.

If the price of a motor vehicle, including a motorcycle, exceeds Rs 5 lakh, the buyer must submit a PAN.

Under the present Income Tax Rules, 1962, motor vehicles were required to submit PAN, regardless of price, while two-wheelers were exempt. However, PAN will now be required for immovable property purchases, sales, gifts, and joint development agreements if the transaction value is over Rs 20 lakh, in contrast to the current threshold of Rs 10 lakh.

The list of Category 1 metropolitan cities that are eligible to receive House Rent Allowance (HRA) has now expanded under the draft regulations. In addition to Delhi, Mumbai, Kolkata, and Chennai, cities like Bengaluru, Pune, Ahmedabad, and Hyderabad have been added.

It is proposed that the value of tax-free benefits offered by employers should rise to reflect the current state of the market. The perquisite value for free meals and non-alcoholic drinks that employers provide has been set at Rs 200 each meal.

For official motor cars, the monthly allowance will be Rs 8,000 for vehicles with an engine capacity below 1.6 litres and Rs 10,000 for other vehicles. These amounts include driver-related allowances.

Furthermore, the draft rules require crypto exchanges to share information with the Income Tax Department and provide comprehensive reporting and due diligence standards to suppliers of crypto-asset services. Also, the Central Bank Digital Currency (CBDC) is recognised as an accepted mode of electronic payment.

According to the Finance Ministry, the Central Board of Direct Taxes (CBDT) will notify stakeholders by the first week of March once the rules have been finalised following stakeholder consultations. However, to implement the Income Tax Act, 2025, which is set to take effect on April 1st, the Income Tax Rules are now being finalised.

The objective of rationalising the PAN quoting threshold is to use technology-enabled reporting methods under the Income Tax Act to collect only relevant data.