The New Income Tax Act, 2025 is set to come into effect from April 1, 2026, replacing the decades-old Income-tax Act, 1961 with a simplified and more streamlined tax framework. The new legislation aims
to make tax laws easier to understand by reducing complex provisions, eliminating redundant sections, and reorganising the structure of the law to improve clarity for taxpayers, professionals, and businesses.
1. PAN Rules Overhauled for High-Value Transactions
Under the draft rules, PAN will be required for annual cash deposits or withdrawals of Rs 10 lakh or more (aggregate in a financial year). Currently, a per-day limit of Rs 50,000 is applicable in deposits, while withdrawals have no specific provision.
PAN will be mandatory for vehicle purchases of Rs 5 lakh or more, including two-wheelers. Currently, PAN is needed for all vehicles, except for two-wheelers, irrespective of value.
For immovable property transactions, including gifts and JDAs, exceeding Rs 20 lakh, PAN must be quoted.
PAN will now be mandatory for all insurance premium payments, regardless of amount. Currently, PAN is required if the premium is above Rs 50,000 in a fiscal year.
However, PAN will be required for hotel/ event payments above Rs 1 lakh per transaction, against the current Rs 50,000.
This replaces the earlier fragmented daily or transaction-based limits and introduces a more annualised reporting structure.
2. Cash Deposits & Withdrawals: Annual Threshold Introduced
Currently, PAN is required for cash deposits exceeding Rs 50,000 in a day. The draft rules shift focus to an annual aggregate threshold of Rs 10 lakh for both deposits and withdrawals.
This could mean tighter tracking of cash-heavy transactions while reducing paperwork for smaller daily banking activities.
3. HRA Benefits Expanded to More Cities
In a major relief for urban salaried taxpayers, Bengaluru, Pune, Ahmedabad and Hyderabad have been proposed to be treated as metro cities for House Rent Allowance (HRA) purposes.
This increases the HRA exemption cap to 50% of basic salary (from 40%) for employees living in these cities, potentially reducing tax liability for lakhs of professionals.
4. Higher Tax-Free Perquisite Limits
The draft rules enhance tax-free limits for certain employer-provided benefits, including official vehicles and employer-provided meals.
The earlier provisions were scattered and outdated. These have now been consolidated and rationalised to reflect current costs and business practices.
5. Property Transactions Threshold Raised
The PAN reporting threshold for immovable property transactions has been increased from Rs 10 lakh to Rs 20 lakh.
Importantly, this now explicitly includes gift transactions, joint development agreements (JDAs), and stamp value-based transactions.
This aligns reporting requirements more closely with prevailing property values.
6. Insurance Premium: PAN Now Mandatory for All
Earlier, PAN was required only if the annual insurance premium exceeded Rs 50,000. Under the draft rules, PAN will be mandatory for all insurance premium payments, regardless of amount. This may increase traceability of high-value policies and prevent misuse.
7. Vehicle Purchases: Two-Wheelers Included
Previously, PAN was required for all motor vehicles except two-wheelers. Now, the rule shifts to a value-based threshold of Rs 5 lakh, and it includes motorcycles and two-wheelers. This aligns compliance requirements with vehicle price escalation.
8. Crypto Exchanges Face Wider Reporting Requirements
Acknowledging the growing digital asset ecosystem, the draft rules expand information-sharing requirements for crypto exchanges. This could mean tighter reporting standards, improved traceability of crypto trades, and greater alignment with anti-tax evasion mechanisms.
9. CBDC Recognised as Valid Electronic Payment Mode
The draft rules formally recognise Central Bank Digital Currency (CBDC) as a valid electronic mode of payment. The Reserve Bank of India has already introduced the Digital Rupee in pilot phases. Recognition under tax rules integrates CBDC into mainstream tax compliance frameworks.
10. Massive Structural Simplification: Rules & Forms Reduced
One of the biggest structural reforms is simplification:
Rules reduced from 511 to 333
Prescribed forms reduced from 399 to 190
Provisions earlier scattered across multiple rules have been consolidated into topic-based frameworks. Operational details are increasingly moved to Schedules, making the rulebook shorter and more navigable.
