Draft Income Tax Rules Propose Major Changes to PAN and Crypto Reporting
The Central Board of Direct Taxes (CBDT) has unveiled a set of draft income tax rules that could significantly alter financial compliance for individuals and businesses in India. These proposals, which are open for public feedback until March 10, 2026, aim to modernize tax administration by addressing emerging financial trends and simplifying processes for small transactions.
Key Proposals in the Draft Rules
The draft rules introduce two major changes that are expected to impact a wide range of taxpayers and financial activities across the country.
Increased PAN Threshold for Cash Transactions
One of the most notable proposals is the increase in the Permanent Account Number (PAN) threshold for cash transactions. Under the current rules, quoting PAN is mandatory for cash transactions exceeding Rs 50,000. The draft rules propose to raise this limit to Rs 2 lakh. This change is designed to reduce compliance burdens for small-scale cash dealings, particularly in rural and informal sectors, while still maintaining oversight on larger transactions that could be used for tax evasion.
New Reporting Requirements for Crypto Assets
In a move to bring greater transparency to the rapidly growing cryptocurrency market, the draft rules introduce new reporting norms for crypto assets. These requirements mandate that individuals and entities involved in crypto transactions must report detailed information to tax authorities. This includes data on the nature of transactions, the parties involved, and the value of assets. The rules aim to curb tax evasion and money laundering in the digital asset space, aligning with global trends toward regulating cryptocurrencies.
Implementation Timeline and Public Consultation
The proposed rules are slated to come into effect from the financial year 2026-27, giving stakeholders ample time to adapt. The CBDT has invited feedback from the public, industry experts, and other stakeholders until March 10, 2026. This consultation period is crucial for refining the rules to ensure they are practical and effective without imposing undue hardships on taxpayers.
Potential Impacts and Rationale
The increase in the PAN threshold is expected to benefit small businesses and individuals by reducing paperwork and compliance costs for minor cash transactions. However, it also raises concerns about potential misuse for larger undeclared cash dealings. On the crypto front, the new reporting norms are seen as a step toward formalizing the taxation of digital assets, which have often operated in a regulatory gray area. By requiring detailed reporting, the government aims to track crypto transactions more effectively and ensure they are taxed appropriately.
Overall, these draft rules reflect the government's efforts to balance ease of doing business with robust tax compliance, adapting to new financial realities while safeguarding revenue collection.
