The Income Tax Department has released draft Income Tax Rules, 2026, proposing significant revisions to when quoting a Permanent Account Number (PAN) will be mandatory for various financial transactions. Issued by the Central Board of Direct Taxes as part of preparations for the Income Tax Act, 2025, which is set to be implemented on April 1, 2026, the draft rules aim to enhance transparency and tighten reporting of large payments and high-value transactions. The changes are open for public comments before the final notification expected by early March.

Higher Thresholds For Cash And Banking Transactions

One of the biggest proposed changes concerns cash deposits and withdrawals at banks. Under the draft rules, quoting PAN will be mandatory only if the total annual cash deposits or withdrawals across one or more accounts aggregate to Rs 10 lakh or more in a financial year. This marks a substantial increase from the current requirement where PAN must be quoted for daily cash deposits over Rs 50,000. The shift reflects a move towards capturing higher-value transactions while easing compliance for smaller cash dealings.

Financial reporting for motor vehicle purchases is also likely to change. Under the draft proposal, individuals will be required to quote PAN only if the purchase price of a vehicle exceeds Rs 5 lakh, a departure from the existing rule where PAN was mandatory regardless of vehicle price and did not specifically cover lower-priced two-wheelers. This threshold-based approach is designed to focus reporting on more significant transactions.

Property, Hospitality And Other Transactions

The draft rules propose raising PAN thresholds for other major transactions. For hotel and restaurant bills, as well as payments to banquet halls, convention centres or event management services, PAN will be required only if the amount exceeds Rs 1 lakh, doubling the previous Rs 50,000 threshold. Meanwhile, for transactions involving immovable propertysuch as purchases, sales, gifts or joint development agreements, the mandatory PAN limit would be set at Rs 20 lakh, up from the current Rs 10 lakh.

Another change covers the insurance sector. The draft rules propose that PAN may become mandatory for initiating any account-based relationship with an insurance company, which is broader than the current requirement where PAN is needed only if life insurance premium payments exceed Rs 50,000 in a year.

Policy Intent And Broader Implications

Officials involved in drafting the rules say the intent behind revising PAN quoting thresholds is to “capture only relevant information” and to reduce compliance burdens for everyday transactions while still tracking larger financial activity. The changes are also expected to support better use of technology and data analytics by tax authorities to enhance oversight.

The proposals also touch on additional areas such as updating perquisite valuations for employee benefits and extending reporting obligations in the financial sector, including for crypto-asset service providers. The draft rules reflect a broader effort to modernise India’s tax compliance framework under the Income Tax Act, 2025, and improve the efficiency of revenue administration.

As the draft rules undergo public consultation, stakeholders including individuals, businesses and industry groups are expected to submit feedback that could shape the final regulations before they are formally notified in March.

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