💳 Draft Income-tax Rules 2026: 5 Key Credit Card Changes You Must Know

The proposed Draft Income-tax Rules, 2026 (effective 1 April 2026, subject to approval) introduce enhanced reporting and compliance norms for credit card users.

Here are the critical updates:

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1️⃣ High-Value Credit Card Payments to be Reported

📌 ₹10 lakh or more (non-cash) in a financial year → Reported by banks/card issuers to the Income-tax Department.
📌 ₹1 lakh or more in cash towards credit card bill → Also reportable.

⚠️ Implication: Large payments will fall under automated financial intelligence tracking.

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2️⃣ PAN Mandatory for Credit Card Application

🪪 PAN is compulsory for applying for a credit card.
Ensures identity validation and financial transparency.

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3️⃣ Credit Cards Allowed for Online Tax Payments

💻 Taxes can be paid using credit cards (along with net banking/debit card).
✔️ Improves liquidity flexibility
✔️ Useful for short-term cash flow management

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4️⃣ Employer-Provided Credit Cards – Perquisite Valuation Rules

If an employer provides a credit card:

✔️ Taxable perquisite = Amount charged
➖ Less: Amount recovered from employee

❗ Not taxable if used exclusively for official purposes, subject to:

• Proper expense records maintained

• Employer certification confirming official usage

Strong documentation will be critical to avoid tax exposure.

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5️⃣ Credit Card Statement as Address Proof

📄 Statement (not older than 3 months) can be used as address proof while applying for PAN.

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📊 Strategic Takeaway

The draft rules indicate:

• Enhanced financial reporting framework

• Greater transparency on high-value transactions

• Increased scrutiny of lifestyle-to-income mismatches

High-spending individuals and business owners should align financial records proactively.

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For structured tax planning and compliance advisory:
📞 +91 77602 52581

#IncomeTax #DraftRules2026 #CreditCard #TaxCompliance #FinancialPlanning

GST CLARIFICATION ON MILK & SCHOOL PRODUCTS

 

Finance Minister Nirmala Sitharaman has clarified key GST concerns raised in the Lok Sabha regarding taxation on essential dairy and school items.

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🥛 No GST on Milk

✔ Fresh milk remains fully exempt from GST.
✔ No change in tax treatment on basic milk consumption.

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🎓 No GST on Education

✔ Core education services are GST exempt.
✔ School education remains outside the GST net.

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✏ GST on School Materials – Clarification

Some processed or packaged school-related products may attract GST depending on classification. However:
✔ Essential educational services – Exempt
✔ Basic necessities – Mostly Nil or low rate
✔ Certain dairy items have seen rate rationalisation/reduction in past GST Council decisions

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📌 Key Takeaway

There is no GST on milk and education services. Public concerns largely arise due to classification differences between raw and packaged/processed goods.

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If you need clarity on GST classification, rate applicability, or compliance impact on your business, feel free to connect.

#GSTUpdate #FinanceMinister #GSTIndia #TaxClarity #BusinessCompliance

Appointment of Auditor — Casual Vacancy Due to Death

When a statutory auditor passes away during their term, the vacancy is treated as a casual vacancy under Section 139(8) of the Companies Act, 2013. ✅ The Board of Directors is empowered to appoint a new auditor within 30 days ✅ No shareholder approval or EGM is required ✅ The appointed auditor holds office until the next AGM ✅ Form ADT-1 must be filed with ROC after appointment This provision ensures continuity in statutory audit and protects compliance timelines. If your company faces such a situation, timely Board action and proper documentation are critical for regulatory compliance. Need guidance on Board resolutions, filings, or audit compliance? We’re here to help.

📌 PF & ESI Compliance — New Company with No Employees

A newly incorporated private limited company often receives PF and ESI registration along with incorporation. A common question is — are returns mandatory even when there are no employees?

Here’s the compliance clarity:

✅ PF (EPF)
If there are no employees or no PF-eligible wages, monthly contribution filing is not required. However, the employer should regularly log in and maintain correct establishment status to avoid compliance alerts.

✅ ESI
Once registered, Nil contribution filing is expected even if there are zero employees. This keeps the portal compliance status clean.

⚖ Threshold Rule
PF normally applies at 20+ employees and ESI at 10+ employees. But once registration is active, compliance continues until formally closed — even if employee count drops.

👉 Best practice: Maintain payroll records, portal hygiene, and file Nil ESI returns where applicable to avoid notices.

Need help managing statutory compliance? Professional guidance ensures smooth operations from day one. 
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📢 CBDT Draft Update — Consolidated Tax Audit Form

CBDT has released Draft Form No. 26 under the proposed Income-tax Rules, 2026 — introducing a single consolidated tax audit report that replaces existing Forms 3CA / 3CB / 3CD.

✅ One unified audit + statement of particulars
✅ Expanded disclosures — GST, TDS & specified transactions
✅ UDIN & CA signature compliance

Action point: Businesses and CAs should review audit templates and prepare for enhanced reporting requirements.

Need a practical checklist to align your audit process? Message us — happy to help.

Foreign Tax Credit (FTC) — Draft IT Rules 2026 Introduce CA Verification

 

The Draft Income-tax Rules, 2026 propose an important compliance update for taxpayers claiming Foreign Tax Credit (FTC) — aimed at improving accuracy and documentation standards.

📌 What is Foreign Tax Credit (FTC)?

FTC allows Indian residents earning income abroad to avoid double taxation by claiming credit in India for taxes paid in a foreign country.

⚖ What’s the Proposed Change? — Draft Rule 76

Taxpayers claiming FTC through Form 44 must now obtain verification from a Chartered Accountant.

This verification becomes mandatory when:

✔ The assessee is a company, OR

✔ Foreign tax paid is ₹1 lakh or more

🧾 What the CA Certification Must Confirm

• Income details and supporting records

• FTC eligibility as per DTAA & Income-tax Act provisions

• Proof of foreign tax payment

🎯 Why This Matters

✅ Improves credibility of FTC claims

✅ Reduces disputes and documentation gaps

✅ Encourages structured compliance

✅ Aligns FTC claims with treaty provisions

📢 Practical Impact

Businesses and high-value FTC claimants should plan early for documentation and CA verification to avoid delays in tax filings.

💡 Bottom Line

FTC continues to protect taxpayers from double taxation — but Draft Rule 76 introduces a stronger verification framework for transparency and compliance.

🏢 PERQUISITES – WHAT’S CHANGED IN THE TAX LAW (Act 1961 → Act 2025 & Rules 2026)

 🏢 PERQUISITES – WHAT’S CHANGED IN THE TAX LAW (Act 1961 → Act 2025 & Rules 2026)

What are Perquisites?

Perquisites are non-cash benefits provided by the employer to the employee and are generally taxable under Section 17(2) of the Income-tax Act. These include employer-provided cars, meals, gifts, loans, education benefits and similar amenities.

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📜 STATUTORY SHIFT — Income-tax Act 1961 → Income-tax Act, 2025

✔ The Income-tax Act, 2025 replaces the old Income-tax Act, 1961 effective 1 Apr 2026 with an updated framework.
✔ Section 17(2) in Act, 1961 continues to govern perquisites and remains a concept in Section 17 of the new Act.
✔ The new Act retains perquisites as taxable income but modernises definitions and simplifies structure of provisions compared to the 1961 law.

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📊 KEY RULE CHANGES — Perquisite Valuation (Rules 1962 → Draft Rules 2026)

The Income-tax Rules 2026 introduce updated perquisite valuation limits, addressing long-pending outdated thresholds in old Rules (1962):

Perquisite Type	Under Old Rules (1962)	Draft Rules 2026
Meal benefits	₹50 per meal exempt	₹200 per meal exempt (→ up to ₹1,05,600/yr if 2 meals × 22 days × 12 mo)
Gifts (non-cash)	₹5,000 p.a.	₹15,000 p.a.
Child education allowance	₹100 /mo per child	₹3,000 /mo per child
Hostel allowance	₹300 /mo per child	₹9,000 /mo per child
Employer-provided car (basic val.)	₹1,800 /mo (≤1.6 L)	₹5,000 /mo (≤1.6 L) + ₹3,000 driver
Medical treatment loans (perq)	Rs 20k limit	Rs 2,00,000 counterpart limit exempt {{with conditions}}

➡ Earlier perquisite ceilings had not been updated for decades; the new proposal aligns benefits with inflation and current cost realities.

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📌 ACT VS RULE INTERPLAY
🔹 The Act (2025) continues to define what counts as a perquisite and retains the key taxation rule under Section 17.
🔹 The Rules (2026 draft) shape how perquisites are valued and set monetary exemption limits — these are administrative details tied to the Act.

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🎯 IMPACT ON SALARIED TAXPAYERS

✔ Higher exempt thresholds: More perquisite benefits will be tax-free or have a higher exemption limit.
✔ Modernised car perq valuation: Car benefit values updated to reflect actual costs, though overall taxable value for some vehicles may rise relative to old rules.
✔ Meal & education perks more meaningful: Substantial uplift in meal, education and hostel exemptions makes salary structuring more tax-efficient.

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📌 KEY TAKEAWAYS

• Income-tax Act, 2025 modernises perquisite provisions without materially altering the concept — perquisites remain taxable income.
• Income-tax Rules 2026 significantly update monetary valuation and exemptions for perks — making several common non-cash benefits more tax-friendly.

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🏠 HRA EXEMPTION – WHAT CHANGED FROM 2026 & HOW IT BENEFITS SALARIED TAXPAYERS

 What is HRA?

House Rent Allowance (HRA) is a salary component paid by employers to employees who live in rented accommodation. It helps reduce taxable income under the old tax regime.

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✅ Legal Provision
HRA exemption is governed by Section 10(13A) of the Income-tax Act read with Rule 2A.

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📊 How HRA Exemption is Calculated
The exempt amount is the least of:

• Actual HRA received
• Rent paid minus 10% of salary
• Prescribed % of salary
 – 50% for metro cities
 – 40% for non-metro cities

(Salary = Basic + DA forming part of retirement benefits)

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🔄 Key Change under Income-tax Rules 2026
Additional major cities are now treated on par with metros for HRA purposes.

➡ Earlier: Only Delhi, Mumbai, Chennai, Kolkata qualified for 50% limit
➡ Now added: Bengaluru, Hyderabad, Pune, Ahmedabad

This increases the eligible exemption ceiling for salaried employees residing in these cities.

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⚖ Old vs New Tax Regime
✔ Old regime → HRA exemption available
✖ New regime → HRA exemption not available

Employees must opt for the regime that gives better net tax efficiency.

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💡 How This Helps Taxpayers
• Higher exemption for urban renters
• Reduced taxable salary
• Better take-home pay under the old regime
• Reflects rising urban housing costs

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📌 Bottom Line
If you live in the newly classified cities and claim HRA under the old regime, your exemption potential increases — translating into tangible tax savings.

For salary structuring or tax planning, evaluate regime choice carefully.

📢 Draft Income Tax Rules 2026 — Key Monetary Changes Clients Must Know

 

The Government has released draft Income Tax Rules 2026 aligned with the upcoming Income Tax Act, 2025. These proposals mainly revise PAN reporting limits, crypto compliance, employee benefits, and HRA rules. Here are the important monetary thresholds:

🔹 PAN Mandatory — Proposed Limits

• Cash deposits/withdrawals: PAN required if total cash transactions reach ₹10 lakh in a financial year (earlier ₹50,000 per day rule)
• Motor vehicle purchase: PAN required only if value exceeds ₹5 lakh
• Hotel/event payments: PAN needed if payment exceeds ₹1 lakh (earlier ₹50,000)
• Property transactions: PAN mandatory if value exceeds ₹20 lakh (earlier ₹10 lakh)
• Insurance accounts: PAN required to start any account-based relationship

🔹 Employee Perquisite Limits

• Tax-free meal benefit proposed at ₹200 per meal
• Employer-provided car valuation:
— Up to 1.6L engine: ₹8,000/month
— Above 1.6L engine: ₹10,000/month
(includes driver cost)

🔹 Crypto Reporting

Crypto exchanges may be required to report investor transactions — stronger compliance monitoring expected.

🔹 HRA Metro City Expansion

Bengaluru, Pune, Ahmedabad, and Hyderabad proposed as metro cities — may increase HRA exemption eligibility.

🔹 CBDC Recognition

Central Bank Digital Currency proposed as a valid electronic payment method.

⚠ Note: These are draft rules and may change after consultation. Expected rollout alongside the new law from April 1.

📢 Appointment of Auditor — Casual Vacancy Due to Death

When a statutory auditor passes away during their term, the vacancy is treated as a casual vacancy under Section 139(8) of the Companies Act, 2013.

✅ The Board of Directors is empowered to appoint a new auditor within 30 days
✅ No shareholder approval or EGM is required
✅ The appointed auditor holds office until the next AGM
✅ Form ADT-1 must be filed with ROC after appointment

This provision ensures continuity in statutory audit and protects compliance timelines.

If your company faces such a situation, timely Board action and proper documentation are critical for regulatory compliance.

Need guidance on Board resolutions, filings, or audit compliance? We’re here to help.


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📢 PAN RULE CHANGES — Draft Income-tax Rules, 2026

 

The government has proposed key updates on when PAN must be quoted in financial transactions. The intent is to rationalize thresholds and align reporting with risk-based monitoring.

🔹 Vehicle purchase — PAN needed only above ₹5 lakh
🔹 Hotel/restaurant cash payments — limit increased to ₹1 lakh
🔹 Life insurance premium — reporting shifts to account-relationship basis
🔹 Property transactions — threshold doubled to ₹20 lakh
🔹 Bank/post office cash withdrawals — new reporting trigger at ₹10 lakh

These proposed revisions aim to simplify compliance while improving transparency in high-value transactions.

Businesses and individuals should review transaction structures and documentation processes to stay aligned.

For clarity or compliance planning, consult your tax advisor.

US Revises Trade Deal Factsheet: What It Means for India’s Agriculture Sector

 

A recent development in the India–US trade discussions has drawn attention after the United States quietly revised its official factsheet describing the proposed trade framework. While the change may appear technical, it carries important signals — especially for India’s agriculture sector.

Let’s break this down in simple terms.

What happened?

The US government initially released a document summarising key elements of a proposed trade understanding with India. That document suggested India would reduce tariffs on certain agricultural products, including pulses (like lentils and chickpeas), and would make firm commitments to purchase American agricultural goods.

Soon after criticism and public debate, the US revised the factsheet. The updated version removed references to pulses, softened language around purchase commitments, and dropped claims that India would eliminate digital service taxes.

Why pulses matter

India is the world’s largest producer and consumer of pulses. Millions of Indian farmers depend on this sector for income. Lower tariffs on imported pulses could allow cheaper foreign products to enter the Indian market, potentially affecting domestic farmers.

By removing pulses from the factsheet, the revision suggests that India has not agreed to open this sensitive sector — or at least not in the way originally described.

Change in wording — and why it’s important

The earlier factsheet used strong language like “committed,” implying binding promises. The revised version uses softer wording like “intends,” which signals flexibility and ongoing negotiation.

In trade diplomacy, wording matters. Strong terms can suggest firm obligations, while softer language indicates that discussions are still evolving.

Digital tax clarification

The initial claim that India would remove digital services taxes was also rolled back. This means India retains its policy position while continuing discussions on digital trade rules.

Political and economic context

Trade negotiations often involve balancing domestic economic protection with international cooperation. Agriculture is politically sensitive in India, and any perception of weakening farmer safeguards attracts strong reactions.

The revision does not necessarily mean the deal has changed. Instead, it suggests that public descriptions are being aligned more carefully with what has actually been agreed — or not agreed — at this stage.

What this means going forward

For now, there is no confirmed decision to reduce tariffs on pulses or open India’s agriculture market in a significant way. The revisions indicate:

• India is maintaining a cautious stance on sensitive farm sectors

• Trade discussions remain ongoing

• Public communication is being recalibrated

Final thought

Trade negotiations are dynamic and often involve adjustments in messaging as much as policy. The revised factsheet signals that India continues to prioritise domestic agricultural interests while engaging in broader economic cooperation with the US.

For farmers, businesses, and policymakers, the key takeaway is simple: protections remain in place for now, and negotiations are still unfolding.

📌 Annual Professional Tax in Karnataka — Key Compliance Guide

What is Professional Tax?
Professional Tax (PT) is a state-levied direct tax under the Karnataka Tax on Professions, Trades, Callings & Employments Act, 1976 applicable to individuals, professionals and entities engaged in any profession, trade, calling or employment within Karnataka.

Who Must Pay Professional Tax?
✔ Salaried individuals with monthly gross income ≥ ₹25,000.
✔ Self-employed professionals (e.g., CA, doctors, lawyers, freelancers) with standing in profession >120 days in the year.
✔ Business entities (companies, LLPs, partnerships, sole proprietors, HUFs, societies, clubs) operating in Karnataka.

Who is Exempt?
🚫 Individuals aged 60+
🚫 Persons with ≥40% disability
🚫 Armed Forces personnel
🚫 Self-employed working <120 days in a year

🚫 Low-income employees below threshold
🚫 Other specific exemptions as notified in Act.

Tax Slab & Amount
📌 Salaried Employees:
• ₹0 if monthly salary ≤ ₹24,999
• ₹200/month for 11 months + ₹300 in February = ₹2,500 per annum (maximum).

📌 Self-Employed & Entities:
• Fixed ₹2,500 per annum per entity / place of business (Professional Tax Enrollment).

Registration Requirements
• PT Registration Certificate (PTRC): Required for employers to deduct & remit PT for employees.

• PT Enrollment Certificate (PTEC): Self-employed professionals & business entities must obtain within 30 days of commencement.

When to Pay
🗓 Salaried / Employer Deducted PT: By 20th of succeeding month for monthly deductions.
🗓 Annual PT for Self-Employed / Entities: Typically by 30th April for the financial year (confirm on portal).

Returns & Compliance
✔ Employers file monthly PT returns (Form 5 / Form 5A) via Karnataka e-PRERANA portal.
✔ Self-employed/entities file Annual Return (Form 4A) where applicable.

Penalty for Late Payment
⚠️ 1.25% per month interest on outstanding PT; may extend up to 50% of tax due.

Strategic Compliance Tips
✔ Integrate PT deductions into payroll workflows.
✔ Maintain PT Enrollment/Registration certificates per location.

✔ Use Karnataka e-PRERANA portal for timely payment & filing. 

 

Budget 2026: 5 High-Impact Changes Every NRI Should Know

India’s Budget 2026 introduces targeted reforms that make it easier for Non-Resident Indians (NRIs) to buy property, invest, manage taxes, and regularize disclosures. The focus is clear: reduce compliance friction and encourage long-term participation in India’s economy. Here’s what matters — quickly and practically.

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1. Property transactions are now smoother

NRI property deals previously involved layered tax procedures that caused delays. The new framework aligns deductions with PAN-based systems, reducing extra registrations and paperwork.

Why it matters: Faster execution, fewer compliance bottlenecks, and lower transaction risk.

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2. One-time foreign asset disclosure window

A limited window allows NRIs and returning residents to voluntarily declare undisclosed overseas assets with reduced penal exposure.

Why it matters: Opportunity to clean up legacy compliance issues and reset financial records.

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3. Tax comfort for visiting or returning NRIs

Specified relief is introduced for NRIs temporarily working in India, easing the transition tax burden on foreign income (subject to conditions).

Why it matters: Encourages global professionals to work or relocate without immediate tax shock.

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4. Expanded access to Indian investments

Investment participation limits and channels for overseas investors have been liberalized, enabling broader access to Indian equity markets.

Why it matters: Greater flexibility to invest in India’s growth with simpler structures.

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5. Simplified compliance ecosystem

The tax framework is being consolidated to reduce ambiguity, shorten processing timelines, and improve administrative efficiency.

Why it matters: Predictable rules and easier long-term financial planning.

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Bottom line

Budget 2026 signals a shift from heavy procedural control to facilitation:

✔ Easier property transactions
✔ Compliance regularization opportunity
✔ Transitional tax relief
✔ Expanded investment access
✔ Streamlined systems

For NRIs, this translates into lower friction, clearer rules, and stronger confidence in engaging with India’s markets.

Professional advice remains essential to apply these benefits correctly.

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📢 CBDT Announces Simpler ITR Filing — Advanced Pre-Filled Returns from April 1, 2026

 📢 CBDT Announces Simpler ITR Filing — Advanced Pre-Filled Returns from April 1, 2026.

The CBDT has introduced draft Income Tax Rules & Forms 2026 aimed at making ITR filing significantly easier — especially for salaried individuals with no additional income.

✅ Pre-filled returns will auto-capture key data
✅ Taxpayers can verify and submit with minimal manual entry
✅ Forms redesigned in simpler language
✅ Focus on reducing redundancy and improving accuracy

These changes align with the new Income-tax Act, 2025 and are expected to reduce compliance burden while improving filing efficiency.

Draft rules are open for public feedback until Feb 22, 2026, with final notification expected in March.

This marks a major step toward technology-driven, taxpayer-friendly compliance.

#IncomeTax #CBDT #ITR2026 #TaxCompliance #FinanceUpdates