The panel has submitted its report to the Information and Broadcasting Ministry.
The report, which has been made public by I&B ministry, also says that where the film genuinely seeks to inform and educate in matters such as human sexuality or safer sex and health, explicit images of sexual activity may be permitted but it should be assigned 'Adults with Caution' category.
The panel had recommended six categories which included U (Universal), UA12+ (over 12 years), UAl5+ (over 15 years), A (Adult), AC (Adult with Caution) or S (for special niche audiences).
In its recommendation, the panel has said while it is "impossible to set out a comprehensive list of words, expressions or gestures that are acceptable at each category in every Indian language," but has suggested that offensive or abusive dialogues should lead to higher classifications.
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One of the controversies that the CBFC has faced in recent times has been over a list of cuss words released by its Chairman Pahlaj Nihalani.
"Films that as a whole portray and promote misuse of psychotropic substances would not be accepted for certification. Works that normalise or glamorise misuse of the same are likely to receive a higher classification than works that show such misuse while emphasising or bringing out the dangers and ramifications of such use of substances," the Benegal panel report says.
Also those which are likely to incite the commission of any offence or where national symbols and emblems are shown in violation of the provisions of the Emblems and Names (Prevention of Improper Use) Act should not get certification.