Draft Income Tax Rules 2026: Major Revisions to PAN Quoting and Cash Handling
The Income Tax Department has unveiled a comprehensive set of draft income tax rules, slated for implementation in the financial year 2026-27. These proposed regulations introduce significant modifications to how individuals manage income tax payments, cash withdrawals, and cash transactions, with a focus on streamlining compliance and reducing administrative burdens.
Overview of the Draft Rules and Stakeholder Engagement
Following the release of the draft rules, the government has actively invited comments and suggestions from stakeholders, including taxpayers, financial institutions, and industry experts. The deadline for submitting feedback is set for February 22, 2026. After a thorough review of the responses, the revised rules will be finalized, formally notified, and are expected to take effect from April 1, 2026. This participatory approach aims to ensure that the regulations are practical and address real-world concerns.
Key Changes in Mandatory PAN Card Quoting
Under the proposed framework, the threshold limits for transactions requiring PAN Card details have been adjusted to reflect current economic conditions. One of the most notable changes involves the purchase or sale of immovable property, where the limit has been raised from Rs 10 lakh to Rs 20 lakh. This adjustment is designed to reduce paperwork for smaller property transactions while maintaining oversight on larger deals.
Revised Thresholds for Cash Deposits and Withdrawals
The draft rules propose a shift from daily to annual limits for cash deposits. Currently, PAN must be quoted for cash deposits exceeding Rs 50,000 in a single day at a bank, cooperative bank, or post office. The new rules would require PAN disclosure only when total cash deposits reach Rs 10 lakh or more during a financial year across multiple accounts. Similarly, for cash withdrawals, PAN will become mandatory once withdrawals aggregate to Rs 10 lakh or more in a financial year, providing a more holistic view of cash flow.
Updates for Motor Vehicle Purchases and Hospitality Payments
In the realm of motor vehicles, the current requirement mandates PAN for all purchases except motorcycles. The draft rules refine this by making PAN disclosure compulsory only when the value of a motor vehicle or motorcycle exceeds Rs 5 lakh, excluding tractors. For hotel and restaurant payments, the threshold for PAN quoting is proposed to increase from Rs 50,000 to Rs 1 lakh for cash transactions, including payments to convention centers, banquet halls, and event venues.
Expanded Requirements for Insurance Policies
The existing rules require PAN Card details for insurance premium payments above Rs 50,000. The draft income tax rules broaden this scope by extending the PAN requirement to any account-based relationship maintained with insurance companies, ensuring comprehensive tracking of financial engagements.
Summary of Proposed Changes in a Comparative Table
The following table outlines the key differences between current and proposed rules for mandatory PAN quoting:
- Cash Deposits: Current: Rs 50,000 in one day; Proposed: Rs 10 lakh in one financial year.
- Motor Vehicle Purchase: Current: Required for all vehicles except two-wheelers; Proposed: Required for value over Rs 5 lakh (excluding tractors).
- Immovable Property Transaction: Current: Rs 10 lakh; Proposed: Rs 20 lakh.
- Hotel/Restaurant Bill: Current: Rs 50,000; Proposed: Rs 1 lakh.
- Cash Withdrawal: Current: Not specified; Proposed: Rs 10 lakh or more in a financial year.
- Life Insurance Premium: Current: Rs 50,000 or more; Proposed: Extended to all account-based relationships with insurers.
These proposed changes aim to simplify tax compliance, reduce the frequency of PAN quoting for minor transactions, and enhance the efficiency of financial monitoring. Stakeholders are encouraged to review the draft rules and provide feedback by the February 2026 deadline to shape the final regulations.
