Govt Releases Draft Income Tax Rules 2026 with Major PAN, Crypto and HRA Changes
The government has released draft Income Tax Rules 2026 with some important proposed changes. It proposed to increase the limit for transactions where quoting a Permanent Account Number (PAN) is required, including cash deposits and withdrawals from banks, buying vehicles or property, and paying large hotel bills.
The draft also suggests increasing the limit for perquisites given by employers to employees and making it compulsory for Crypto exchanges to share transaction details with the Income Tax Department, making crypto investments more closely monitored. It also includes Central Bank Digital Currency (CBDC) as a valid electronic payment method.
Additionally, more cities such as Bengaluru, Pune, Ahmedabad, and Hyderabad have been added to the list of Category 1 metropolitan cities for claiming House Rent Allowance (HRA). The list already includes Delhi, Mumbai, Kolkata, and Chennai.
The Central Board of Direct Taxes (CBDT) will complete the new income tax rules after discussing them with stakeholders. These rules are expected to be officially announced by the first week of March. The new rules are being prepared to support the Income Tax Act, 2025, which will be effective from April 1.
Under the proposed Income Tax Rules, 2026, the following are the conditions where a Permanent Account Number (PAN) is compulsory:
a. If you deposit or withdraw Rs. 10 lakh or more in cash during a financial year across one or more of your bank accounts. Presently, if you deposit more than Rs. 50,000 in cash in a single day in a bank or cooperative bank.
b. For buying motor vehicles, a PAN is required if the vehicle costs more than Rs. 5 lakh. Earlier, PAN was mandatory for purchasing all motor vehicles regardless of price, but the Income Tax Rules, 1962, did not require PAN for buying two-wheelers.
c. If you pay more than Rs. 1 lakh to a hotel, restaurant, banquet hall, convention centre, or event manager, you must provide your PAN. Presently, PAN is required if the bill is more than Rs. 50,000.
d. If you buy, sell, gift, or enter into a joint development agreement for a property and the value is more than Rs. 20 lakh, you must provide your PAN. Presently, this limit is Rs. 10 lakh
e. Under the new draft rules, you must provide your PAN card to start any account-based relationship with an insurance company. Right now, PAN is required only if your total life insurance premium payments exceed Rs. 50,000 in a financial year.
As per sources, the government wants to make sure that PAN is asked only where it really matters, instead of for every small or unnecessary transaction.
The government has proposed increasing the tax-free limits on free meals and official vehicles to reflect current market conditions. The tax-free perquisite value for free food and non-alcoholic beverages has been set at Rs 200 per meal. However, for vehicles, the allowance for cars with an engine capacity below 1.6 litres will have a monthly allowance valued at Rs 8,000, while cars with higher engine capacity will have a value of Rs 10,000 per month. These amounts also cover the cost of drivers. Additionally, the draft rules introduce stricter reporting and due diligence requirements for crypto-asset service providers.
