The Central Board of Direct Taxes has proposed far-reaching amendments to the requirement of quoting a Permanent Account Number across a wide range of financial transactions. The move is expected to provide relief for smaller payments. At the same time, it will sharpen the reporting focus on high value transactions.
The suggestions form the draft Income tax Rules, 2026, which is designed to give effect to the Income Tax Act, 2025, which is effective in April 1.
The new rules as implemented are going to drastically increase the threshold beyond which PAN will have to be provided. The officials explain that the concept is to make transactions of both people and companies less frictional without making the tax department less effective in monitoring huge amounts of money transfer.
Among the most prominent changes, it is its connection to cash depositing and withdrawals. Currently, PAN is required in cases of cash deposits of more than fifty thousand rupees in one day.
In the draft system, the threshold would take effect only in instances where aggregate deposits or withdrawals have hit ten lakh rupees or above in a financial year, irrespective of whether the account is a single or an array of bank accounts. The movement of compliance out of the daily small activity and to the annual high value view and, more importantly, makes withdrawals accounted to in the reporting net.
Rules concerning vehicle purchase are also reconsidered in the proposals. Today PAN has been declared compulsory when purchasing most motor vehicles with the two wheelers excluded in the circle. The draft proposes a trigger of value.
When the price of purchase was more than five lakh rupees, buyers would have to quote PAN. This implies that there is a possibility of a low end priced car missing the requirement, and high priced two wheelers to enter.
Another area that limits could be loosened is in spending on hospitality and events. Whenever the payment to the hotels, restaurants, banquet halls, convention centres or event managers exceeds one lakh rupees, PAN would become a necessity. This current limit is fifty thousand rupees.
The players in the industry feel that this might decrease the amount of paper work in the wedding, conferences, and other corporate gatherings where multiple mid sized payments are frequent.
The reporting bar is also suggested to be elevated higher in the property transactions. Transactions related to purchase, selling, gifts or joint development of immovable property would fall under PAN where the value of the exchange is above twenty lakh rupees as opposed to the current ten lakh rupee threshold.
This move is likely to impact on documentation practices of numerous buyers and sellers considering the magnitude of real estate prices in most cities.
The draft rules however broaden the scope in the insurance segment. In lieu of associating PAN to premium payments exceeding a stipulated sum of money per year, the proposal obliges the opening of any account based relationship with an insurer. This may imply the capture of taxpayer data sooner when it comes to onboarding itself.
CBDT will examine feedback of stakeholders and thereafter issue notification of the final rules which is likely to be by the first week of March.
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The transition schedule is also brief with the broad legislation framework being operational at the beginning of the new financial year.
According to tax experts, the proposals are an indication of seeking to strike a balance between ease of doing business and enhanced intelligence collection. The authorities seem to be adjusting the compliance effort where it is most needed by raising thresholds in one place and expanding coverage in another.
The following weeks will be significant to taxpayers. Upon its completion, the revised boundaries will redefine documentation standards in banks, dealerships, hotel and registrar offices nationwide.
