Income Tax Draft Rules: PAN thresholds raised for cash deposits, car buys, property transactions - DETAILS

India’s Income Tax framework is set for a wide overhaul as the Draft Income Tax Rules propose higher transaction limits for quoting Permanent Account Number (PAN) across banking, property, vehicle purchases, and high-value spending.

The proposed rules aim to simplify compliance while ensuring the tax department captures only meaningful financial information using improved digital reporting systems.

Under the Draft Income Tax Rules, quoting PAN will now be mandatory for cash deposits or withdrawals aggregating to Rs 10 lakh or more in a financial year across one or multiple bank accounts of a person. At present, PAN is required if a cash deposit crosses Rs 50000 in a single day, making the new rule a major rationalisation.

For motor vehicle purchases, PAN will be required only if the vehicle price exceeds Rs 5 lakh. Currently, PAN is mandatory for four-wheelers irrespective of price, and two-wheelers are outside the rule altogether. The proposed change brings clarity and uniformity across segments.

Spending at hotels, restaurants, convention centres, banquet halls, or with event management firms will also see a higher reporting threshold. PAN will be compulsory only when payments exceed Rs 1 lakh, compared with the existing Rs 50000 limit.

Property transactions are another key area of change. PAN will have to be quoted for purchase, sale, gift, or joint development agreements of immovable property if the value exceeds Rs twenty lakh, doubling the current limit of Rs 10 lakh.

The draft rules further make PAN mandatory for starting an account-based relationship with insurance companies. At present, PAN is required only when life insurance premiums cross Rs 50000 in a financial year.

Officials say the idea behind raising PAN thresholds is to collect only 'relevant information' while leveraging technology upgrades by reporting entities under the new Income Tax Act framework.

Beyond PAN rules, the draft also revises employee perquisites to reflect present-day costs. The value of free food and non-alcoholic beverages provided by employers is proposed at Rs 200 per meal.

For official cars, the monthly perquisite value for vehicles below one point six-litre engine capacity is set at Rs 8000, while larger vehicles will carry a value of Rs 10000 per month, including driver allowances.

Another significant proposal is tighter reporting norms for crypto-asset service providers. Crypto exchanges will be required to follow detailed due-diligence and information-sharing obligations with the tax department.

The draft also expands the list of Category-One metro cities for House Rent Allowance (HRA) benefits. Along with Delhi, Mumbai, Kolkata and Chennai, Bengaluru, Pune, Ahmedabad, and Hyderabad are proposed to be added.

Additionally, Central Bank Digital Currency (CBDC) has been recognised as an accepted mode of electronic payment under the rules.

The Central Board of Direct Taxes (CBDT) is expected to finalise the Income Tax Rules after stakeholder consultations and notify them by the first week of March. These rules are being framed to operationalise the Income Tax Act, 2025, which comes into effect from April 1.