Draft Income Tax Rules Raise PAN Limits, Target High Value Transactions

India’s proposed overhaul of Permanent Account Number  (PAN)-quoting norms under the Draft Income Tax Rules, 2026 signals a decisive shift towards risk-based tax compliance, aiming to ease routine transactions while sharpening scrutiny of high-value financial activity. By replacing low, event-based thresholds with higher annual aggregation limits and expanding the scope of reportable transactions, the government seeks to reduce compliance friction for individuals and businesses, even as it strengthens traceability of significant cash flows and asset transfers.

Tax experts say the move reflects a more calibrated approach to data-driven enforcement - one that prioritises material economic activity over blanket reporting.

Revised Rules For PAN Quoting

Under the revised rules, taxpayers will be required to quote their PAN only when specified transactions cross higher monetary thresholds, thereby reducing compliance obligations for routine, lower-value financial activities.

“Earlier, PAN quoting requirements applied at relatively low transaction values, such as cash deposits exceeding Rs 50,000 in a single day, purchase of any four-wheeler irrespective of value, or modest expenditure on hotels and events. These lower thresholds often resulted in widespread reporting, even for ordinary personal or business transactions, increasing documentation and compliance burdens without necessarily improving tax intelligence,” says Aditya Bhattacharya, Partner, King Stubb & Kasiva, Advocates and Attorneys.

However, as per the proposed Income Tax Rules, 2026, furnishing the PAN will be mandatory for cash deposits or withdrawals aggregating to Rs 10 lakh or more in a financial year, whether through one or multiple accounts held by a person.

Elaborating further, Sandeepp Jhunjhunwala, Partner at Nangia Global Advisors, says that under the revised rules, cash deposits with banks or post offices now require PAN where aggregate deposits reach Rs 10 lakh or more in a financial year across one or multiple accounts, replacing the earlier daily limit of Rs 50,000. Cash withdrawals, previously outside the reporting framework, have also been brought within its ambit with the same annual threshold. The explicit inclusion of cash withdrawals brings significant cash outflows within the reporting net and reflects a clear policy intent to discourage cash-intensive transactions.

Under the revised rules, the PAN requirement has been extended to include motorcycles, with a uniform threshold of Rs 5 lakh applicable to both four-wheelers and two-wheelers. This rationalises compliance for lower-value purchases while ensuring traceability for higher-value automobiles and premium motorcycles. In respect of immovable property, the threshold has been increased from Rs 10 lakh to Rs 20 lakh, and the scope expanded to cover transfers by way of gift and transactions under Joint Development Agreements.

“Gifts and Joint Development Agreements both involve real transfer of economic value, and hence are being brought under the tax reporting framework to plug any possible tax leakages as also to improve transparency. Further structural changes include requiring PAN at the commencement of any account-based relationship with an insurer, replacing the premium-based trigger and advancing the compliance point to earlier stage. Cash payment reporting has been widened beyond hotels and restaurants to include convention centres, banquet halls and event management service provider, with the threshold increased to Rs 1 lakh for any single transaction. Conversely, the requirement to furnish PAN for cash payments relating to foreign travel or foreign currency purchases has been withdrawn,” informs Jhunjhunwala.

The upward revision of transaction thresholds for the purposes of quoting PAN and financial reporting represents a calibrated and risk-based refinement of the reporting framework. By increasing the thresholds, the measure appropriately narrows the reporting universe to transactions of greater materiality, thereby reducing low-value data capture and associated compliance costs. This rationalisation is expected to enhance the quality and usability of reported information, improve administrative efficiency for reporting entities, and support more targeted and effective tax risk assessment by the Authorities.

The revised limits seek to rationalise this approach by focusing on aggregated or higher-value transactions that are more indicative of significant economic activity. “For instance, PAN reporting for cash transactions will now be linked to annual aggregates, higher thresholds have been prescribed for property and vehicle purchases, and increased limits apply to hospitality and event-related payments. This recalibration allows tax authorities to concentrate on material transactions while easing friction for compliant taxpayers,” says Aditya Bhattacharya.

From a taxpayer’s perspective, the immediate impact is a reduction in procedural compliance for day-to-day transactions. Small and mid-value purchases that earlier required PAN disclosure may now fall outside the reporting net, offering greater convenience, particularly to individuals and small businesses. At the same time, the changes reinforce the government’s intent to strengthen data-driven scrutiny of high-value financial flows.

Precaution For Taxpayers

Taxpayers should, however, remain cautious and proactive. “The revised thresholds do not dilute the obligation to maintain accurate records or comply with other provisions such as TDS, TCS, or reporting under specified financial transactions. It is also critical to ensure that PAN remains valid and operative, including Aadhaar linkage, as non-compliance on this front can have broader tax consequences,” suggests Bhattacharya.

In conclusion, the enhanced PAN reporting limits represent a pragmatic step towards simplifying compliance while preserving the integrity of the tax system. Taxpayers would be well advised to review their transaction patterns, stay updated on the final notified rules, and seek professional guidance to align their practices with the new regime once it comes into force.