New Delhi: The Central Board of Direct Taxes has proposed significantly higher transaction limits for quoting Permanent Account Number (PAN) in daily financial activities, bringing relief to millions of taxpayers who will no longer need to furnish PAN for smaller transactions.
The Draft Income Tax Rules 2026, released for public consultation, raise PAN quoting thresholds across five major transaction categories, marking the most substantial revision in PAN requirements in over a decade. The changes will take effect from April 1, 2026, alongside the new Income Tax Act 2025.
KEY HIGHLIGHTS
- ₹10 lakh annual limit for cash transactions requiring PAN (up from ₹50,000 per day)
- ₹5 lakh threshold for vehicle purchases (new uniform rule)
- ₹20 lakh limit for property transactions (doubled from ₹10 lakh)
- ₹1 lakh threshold for hotel/event bills (doubled from ₹50,000)
- PAN mandatory when opening insurance accounts
- Eight cities now classified as metros for HRA (added Bengaluru, Pune, Ahmedabad, Hyderabad)
- Final rules to be notified by first week of March 2026
- Implementation from April 1, 2026
Why these changes matter
Government sources indicated the rationale behind raising PAN thresholds is to capture only relevant high-value information while leveraging technology-enabled reporting mechanisms under the new Income Tax Act. The move aims to reduce compliance burden for routine transactions while focusing monitoring resources on high-value activities.
The changes form part of a broader simplification agenda under the Income Tax Act 2025, which reduces the total number of rules from 511 to 333 and tax forms from 399 to 190.
Five key PAN threshold changes with practical impact
1. Cash deposits and withdrawals: From daily ₹50,000 to annual ₹10 lakh
Old Rule: Banks required PAN for cash deposits exceeding ₹50,000 in a single day at any banking company or cooperative bank.
New Rule: PAN will be mandatory only for cash deposits or withdrawals aggregating to ₹10 lakh or more in a financial year across one or more accounts of a person.
Impact Analysis: This 20-fold increase in threshold significantly benefits small traders, retailers, and individuals who regularly deal in cash for legitimate business purposes. A shopkeeper depositing ₹75,000 weekly from cash sales will not need to furnish PAN for each transaction, as long as annual deposits stay below ₹10 lakh.
Practical Example: Rajesh, a small electronics retailer in Chennai, previously had to furnish his PAN multiple times weekly when depositing daily cash sales ranging from ₹60,000 to ₹80,000. Under the new rules, he will only need to quote PAN once his cumulative deposits in a financial year cross ₹10 lakh. This eliminates repetitive paperwork for routine banking.
Who Benefits Most: Small and medium businesses dealing primarily in cash, individuals with multiple savings accounts who make regular deposits, and senior citizens who prefer cash banking.
2. Motor vehicle purchases: Uniform ₹5 lakh threshold for all vehicles
Old Rule: PAN was mandatory for all motor vehicle purchases regardless of price. Two-wheelers had no PAN requirement under Income Tax Rules 1962.
New Rule: Buyers will need to quote PAN only if the vehicle price exceeds ₹5 lakh. This applies uniformly to cars, motorcycles, and all motor vehicles.
Impact Analysis: The change creates a rational threshold that reflects current vehicle prices while bringing two-wheelers into a uniform framework. Entry-level cars, mid-range motorcycles, and scooters below ₹5 lakh will no longer require PAN disclosure.
Practical Example: Priya plans to purchase a compact sedan priced at ₹4.8 lakh. Under current rules, she must furnish PAN. Under the new rules, no PAN will be required. However, if she opts for a variant priced at ₹5.2 lakh, PAN becomes mandatory.
Who Benefits Most: First-time vehicle buyers purchasing budget cars or mid-segment two-wheelers, young professionals opting for entry-level vehicles, and buyers in smaller cities where vehicle prices tend to be lower.
3. Property transactions: Threshold doubled to ₹20 lakh
Old Rule: PAN was required for purchase, sale, gift, or joint development agreements involving immovable property if the transaction value exceeded ₹10 lakh.
New Rule: PAN will be required only if the transaction value exceeds ₹20 lakh.
Impact Analysis: This change particularly benefits buyers in tier-2 and tier-3 cities where property prices remain moderate, as well as those purchasing agricultural land, plots in peripheral areas, or small residential units. It also simplifies compliance for gift deeds and family property transfers.
Practical Example: Amit is purchasing a 200-square-foot plot in a semi-urban area of Madhya Pradesh for ₹18 lakh. Under current rules, both he and the seller must furnish PAN. Under new rules, PAN disclosure is not required, simplifying the transaction for both parties.
Who Benefits Most: Buyers in smaller cities and rural areas, purchasers of agricultural land, individuals involved in intra-family property transfers, and those buying plots or small residential units below ₹20 lakh.
4. Hotel and event bills: Limit doubled to ₹1 lakh
Old Rule: PAN was required for payments to hotels, restaurants, convention centres, banquet halls, or event management services if the bill exceeded ₹50,000.
New Rule: PAN will be required only if the payment exceeds ₹1 lakh in a single transaction.
Impact Analysis: This benefits individuals and businesses hosting mid-scale events, celebrations, and corporate meetings. Family functions, small weddings, birthday parties, and company offsites with bills between ₹50,000 and ₹1 lakh will no longer require PAN disclosure.
Practical Example: A company books a banquet hall and catering services for an annual team celebration with total billing of ₹85,000. Under current rules, the company must furnish its PAN. Under new rules, no PAN is required, reducing documentation for routine business hospitality expenses.
Who Benefits Most: Middle-class families hosting functions, small businesses organizing events and meetings, companies with regular corporate hospitality needs, and individuals planning celebrations.
5. Insurance: PAN now mandatory at account opening
Old Rule: PAN was required only when life insurance premium payments aggregated to more than ₹50,000 in a financial year.
New Rule: PAN will be mandatory for starting any account-based relationship with an insurance company, regardless of premium amount.
Impact Analysis: This represents a shift from transaction-level to relationship-level PAN requirement. While it eliminates the need to furnish PAN repeatedly when crossing premium thresholds, it requires PAN disclosure upfront when opening any insurance account, including term plans, health policies, and unit-linked insurance plans.
Practical Example: Sunita opens a basic term insurance policy with an annual premium of ₹12,000. Under current rules, she does not need to furnish PAN as the premium is below ₹50,000. Under new rules, she must provide PAN when opening the account, even though the premium amount is low.
Who Benefits Most: Policyholders with high-premium policies who previously had to furnish PAN repeatedly. The change simplifies long-term compliance but requires all new policyholders to have PAN regardless of premium amount.
Additional regulatory changes in Draft Rules 2026
HRA metro city expansion
Four additional cities have been added to the Category 1 metropolitan cities list for House Rent Allowance claims: Bengaluru, Pune, Ahmedabad, and Hyderabad. This expands the metro list from four cities (Delhi, Mumbai, Kolkata, Chennai) to eight.
Impact: Salaried employees living in these newly added cities can now claim higher HRA exemptions (50% of salary instead of 40%). This provides tax relief to lakhs of employees in India’s fast-growing urban centers.
Perquisite valuation updates
Tax-free perquisite values have been updated to reflect current market conditions:
- Free meals: ₹200 per meal for food and non-alcoholic beverages provided by employers
- Official motor cars: ₹8,000 per month for vehicles with engine capacity below 1.6 litres; ₹10,000 per month for larger vehicles (includes driver allowance)
These revised valuations reduce taxable perquisite income for salaried employees receiving these benefits.
Crypto reporting framework
The draft rules introduce detailed reporting obligations for crypto-asset service providers. Cryptocurrency exchanges will be mandated to share transaction information with the Income Tax Department. Central Bank Digital Currency (CBDC) has been included as an accepted mode of electronic payment.
Data on crypto transactions is expected to start reaching the Income Tax Department from financial year 2027-28 onwards, providing authorities with visibility into digital asset dealings.
Comparison: Old vs New PAN thresholds
| Transaction Type | Current Threshold | New Threshold | Increase Factor |
|---|---|---|---|
| Cash deposits/withdrawals | ₹50,000 per day | ₹10 lakh per year | 20x |
| Motor vehicles | Mandatory for all cars; no rule for two-wheelers | ₹5 lakh (all vehicles) | New uniform threshold |
| Property transactions | ₹10 lakh | ₹20 lakh | 2x |
| Hotel/event bills | ₹50,000 | ₹1 lakh | 2x |
| Insurance | ₹50,000 annual premium | Account opening (any amount) | Shift to relationship-level |
Timeline and implementation roadmap
February 10, 2026: Draft Income Tax Rules 2026 released for public consultation
First week of March 2026: CBDT to finalize rules after stakeholder consultations and notify them officially
April 1, 2026: New rules come into effect alongside Income Tax Act 2025
The Income Tax Department has created a utility on its e-filing portal to collect public feedback. Stakeholders including taxpayers, businesses, tax professionals, and industry bodies can submit their inputs until the final notification.
Who benefits most from these changes
Small Traders and Retailers: Reduced frequency of PAN disclosure for routine cash deposits significantly eases banking compliance.
Middle-Class Families: Relief in property purchases below ₹20 lakh, event bookings below ₹1 lakh, and vehicle purchases below ₹5 lakh.
Small and Medium Businesses: Fewer PAN disclosure requirements for regular business transactions like cash deposits, vendor payments, and event bookings.
First-Time Homebuyers: Simplified documentation for affordable housing purchases, especially in tier-2 and tier-3 cities.
Young Professionals: Easier vehicle purchases and reduced compliance for lifestyle expenses.
Unchanged areas: What still requires PAN
The draft rules do not change PAN requirements for:
- Opening bank accounts
- Mutual fund investments above specified limits
- Stock market transactions
- Purchase of bonds and debentures above thresholds
- Sale of shares above specified values
- Credit card applications above specified limits
These transactions continue to require PAN disclosure as per existing framework.
Frequently Asked Questions
No. PAN is required only if your total cash deposits or withdrawals across all accounts reach ₹10 lakh or more in the financial year. A single deposit of ₹3 lakh does not trigger PAN requirement under the new rules.
The draft rules use the term “price” which typically means the on-road price including all charges. Clarification on whether ex-showroom price or on-road price applies is expected in the final notification.
No. The account-based relationship PAN requirement applies only when opening new insurance accounts from April 1, 2026. Existing policyholders are not required to re-submit PAN.
The new rule covers deposits across “one or more accounts of a person,” which means cumulative deposits across all accounts with all banks. If your total deposits across all banks exceed ₹10 lakh in the financial year, PAN disclosure becomes mandatory.
The revised PAN rules will be implemented from April 1, 2026, subject to final notification by CBDT in early March 2026.
Yes. The Income Tax Department has invited public comments through its e-filing portal utility. Stakeholders can submit inputs until the final notification is issued.
These are draft rules open for public consultation. The final rules may incorporate modifications based on stakeholder feedback before notification in early March 2026.
The authorities retain the power to investigate transactions of any size during assessments and inquiries. The PAN threshold changes only affect upfront disclosure requirements, not investigative powers.
Yes. Banks maintain annual cumulative records of cash deposits and withdrawals for each customer. When you approach the ₹10 lakh threshold, the bank will request PAN details.
Technically yes, but tax authorities can examine the source of such regular high-value cash deposits during assessments, even if PAN was not quoted at the time of deposit. The threshold change does not eliminate the need to explain the source of cash if questioned.
Disclaimer: This article is for informational purposes only. Readers are advised to consult qualified tax professionals for specific guidance on their tax obligations and compliance requirements. The final rules may differ from the draft after incorporating stakeholder feedback.
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