Draft Income-tax Rules 2026: Key Proposed Changes, New Compliance Norms and Taxpayer Impact

Context

The Central Board of Direct Taxes (CBDT) has released draft Income-tax Rules and Forms, 2026 to align with the new Income-tax Act, 2025, which will come into force from April 1. The draft has been placed in the public domain for 15 days for feedback.

Higher thresholds for quoting PAN

The draft rules propose increasing monetary limits where quoting Permanent Account Number (PAN) is mandatory, to reflect higher transaction values.

Cash Deposits and Withdrawals

• New rule: PAN required if total cash deposits or withdrawals reach ₹10 lakh or more in a financial year, across one or multiple bank accounts.
• Earlier rule: PAN was required for cash deposits above ₹50,000 in a single day.

Purchase of Motor Vehicles

• New threshold: PAN mandatory for vehicle purchases above ₹5 lakh, including two-wheelers.
• Earlier rule: PAN was required for all vehicles except two-wheelers, without a value threshold.

Hotel, Restaurant and Event Payments

• PAN required for payments exceeding ₹1 lakh for:
  • Hotel or restaurant bills
  • Banquet halls and convention centres
  • Event management services
• Earlier limit: ₹50,000.

Property Transactions

• PAN mandatory for purchase, sale, gift, or joint development of property valued above ₹20 lakh.
• Earlier limit: ₹10 lakh.

Revision in Employer-Provided Perquisites

The draft rules update tax-free perquisite values to match present-day costs.

Free Meals

• Value of free food and non-alcoholic beverages fixed at ₹200 per meal.
• Helps standardise valuation across employers.

Official Motor Cars

• Cars with engine capacity below 1.6 litres: ₹8,000 per month.
• Cars above this limit: ₹10,000 per month.
• Amount includes driver allowance.

Expansion of Metro Cities for HRA

• New cities added: Bengaluru, Pune, Ahmedabad, and Hyderabad.
• These cities will now be treated as metro cities for calculating House Rent Allowance (HRA).
• Earlier, only Delhi, Mumbai, Kolkata, and Chennai were included.

CBDC and Digital Payments

• Central Bank Digital Currency (CBDC) has been included in the list of non-cash electronic modes of payment.
• This formally recognises CBDC as a valid digital payment method under tax rules.

New Reporting Rules for Crypto Exchanges

• Crypto-asset service providers will have to follow reporting and due-diligence requirements.
• Information sharing by crypto exchanges will:
  • Cover transactions from FY 2026-27 and begin from FY 2027-28
• Aim is to improve tracking of virtual digital asset transactions.

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