The Income Tax department has proposed to significantly ease the threshold for mandatory Permanent Account Number (PAN) quoting for gifts and immovable property, cash deposits/withdrawals and purchase of vehicle under the draft Income Tax Rules, 2026.
The Central Board of Direct Taxes (CBDT) is likely to notify the draft IT rules by the first week of March, official sources said on Monday. However, taxpayers filing income tax returns for Assessment Year (AY) 2026-27 will continue to use the current forms and rules prescribed under the Income Tax Act, 1961, according to sources from the CBDT.
“The advance taxes in FY27 to be filed under the new rules and forms,” a CBDT source said.
The CBDT on Saturday released the draft IT rules 2026, aligned with the new Income-Tax Act, 2025, which is set to take effect from April 1.
What do the draft rules state?
The draft rules propose that transactions involving purchase, sale, gift, or joint development of immovable property will need PAN above Rs 20 lakh (previously Rs 10 lakh). It also proposes raising the limit for cash deposits or withdrawals aggregating Rs 10 lakh or more in a financial year across one or more accounts, compared to the existing Rs 50,000 per-day requirement at banks or cooperative banks.
For motor vehicle purchases (including motorcycles), PAN quoting will now apply only when the value exceeds Rs 5 lakh, while the current rule mandates it for all four-wheelers irrespective of price and none for two-wheelers.
Hotel, restaurant, banquet hall, convention centre, or event management payments above Rs 1 lakh will require PAN, up from the present Rs 50,000 threshold. Additionally, initiating any account-based relationship with an insurance company will mandate PAN quoting, replacing the current rule that applies only to life insurance premiums exceeding Rs 50,000 annually.
Tax base to widen?
The officials expressed optimism that with the roll-out of the new rules the tax base will be widen. Currently, around 90 million income tax returns are filed annually, while an estimated 120 million individuals pay taxes through various mechanisms, highlighting significant potential to bring more people into the formal filing system.
The new framework also includes new and detailed rules inserted in relation to reporting and due diligence to be adhered by crypto-asset service providers. The CBDT officials, however, stated that the crypto exchanges and other intermediaries are anticipated to start providing transaction data to the tax department in accordance with the new income tax act, beginning 2027.
The government has simplified the language of the rules and provided formulas and tables wherever necessary. The CBDT officials said that the aim is to remove compliances which are not required, removing redundancy and standardisation of forms for easier compliance. The number of rules and forms has also been reduced significantly from 511 and 399 under existing framework to 333 and 190 respectively under new rules.