New Delhi: The contours of the new income tax rules coming into effect from April 1, 2026, have become clear. Draft rules issued by the Central Board of Direct Taxes (CBDT) indicate that routine, small-value transactions will become simpler, while reporting for high-value dealings, salary perks, insurance and foreign income will become more stringent.
Relief in banking and cash transactions
Under the new framework, individuals will not be required to furnish PAN if the total cash deposits or withdrawals across one or multiple bank accounts remain below ₹10 lakh in a financial year.
Earlier, PAN was mandatory for cash deposits exceeding ₹50,000 in a single day. The revised rule is aimed at simplifying compliance for small account holders.
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Higher PAN threshold for hotel payments
For cash payments at hotels, the PAN requirement threshold has been increased to ₹1 lakh, up from ₹50,000. This is expected to benefit middle-class customers making moderate travel payments.
PAN rule relaxed for car purchases
PAN will now be required only for purchasing vehicles priced above ₹5 lakh. Buyers of entry-level cars will no longer need to provide PAN, reducing paperwork for lower-value purchases.
Higher reporting limit for property deals
The PAN reporting threshold for property transactions has been proposed to be raised from ₹10 lakh to ₹20 lakh, easing compliance in smaller real estate deals.
Stricter rules for life insurance and ULIPs
PAN will be mandatory for all life insurance premiums, irrespective of amount.
In addition, ULIPs with annual premiums exceeding ₹2.5 lakh will attract tax on maturity proceeds, tightening oversight on high-value insurance investments.
Higher taxable value for company cars
Employees using company-provided cars for personal purposes will see higher taxable perquisite values:
- Up to 1.6-litre engine: ₹8,000 per month
- Above 1.6-litre engine: ₹10,000 per month
This will increase the taxable component of salaries for such benefits.
Relief in salary allowances
- Tax-free meal allowance: ₹200 per meal
- Gift exemption: ₹15,000 per year
- Interest-free staff loan exemption: Up to ₹2 lakh
These changes provide limited relief within salary structures.
Major boost for education allowances
Education allowance: ₹3,000 per month per child
Hostel allowance: ₹9,000 per month per child
These represent a substantial increase and are expected to ease the tax burden on parents.
More cities eligible for 50% HRA benefit
The 50% HRA exemption will no longer be restricted to the four metros. Bengaluru, Hyderabad, Pune and Ahmedabad will also qualify, lowering taxable income for employees in these cities.
Stricter ITR filing norms
Income tax returns may be marked defective if mandatory details, schedules or tax payments are missing. Tax notices and orders will also be delivered through a mobile app, enabling real-time alerts.
New rule for foreign tax credit
If foreign tax paid is ₹1 lakh or more, claiming Foreign Tax Credit will require a chartered accountant’s certificate, increasing documentation requirements for overseas income.
Overall impact
The new rules aim to simplify compliance for small and routine transactions while tightening monitoring of high-value and complex financial activities. The system is expected to become more digital, transparent and compliance-driven, helping curb tax evasion while placing greater reporting responsibility on taxpayers.
