The Central Government has introduced several significant reforms to the Income Tax Act and launched draft rules. They would initially be open to public consultation and are set to go into effect from April 1, 2026, once they are finalised. Of the proposals are the fundamental changes that concern the use of the PAN (Permanent Account Number). This would see the government update the thresholds for quoting of PAN for all financial transactions, including cash deposits, acquiring new cars, hotel services, real estate transactions and insurance.
Large Rise in Caps on Cash Deposits and Withdrawals: The proposal suggests that PAN will only be needed if a person funds or withdraws over ₹10 lakh in cash in a financial year. Currently, PAN must be issued for cash deposits in excess of ₹50,000 in a day.
More Expensive Vehicle Purchase Requirements: According to the draft rule, PAN will be mandatory only if the value of the motor vehicle exceeds ₹5 lakh. Currently, regardless of the value of the vehicle, PAN is obligatory.
Other Services Including Hotels, Banquets and Events: At present, if a payment to hotels, restaurants, banquet halls, convention centres, or event managers exceeds ₹50,000, PAN must be furnished. The new proposal raises that cap to ₹1 lakh.
Real Estate Transactions: Currently, PAN is needed when the value of house purchased or sold amounts to more than ₹10 lakh. The draft outlines to raise the threshold to ₹20 lakh.
PAN for Insurance Policies: PAN may, under the proposed change, become compulsory at the time of purchase of the insurance policy itself. PAN is currently being imposed only if annual life insurance premium exceeds ₹50,000.
In the big picture, it would seem the government is simplifying compliance with a few threshold lifts in various levels. In the insurance industry, the proposal shifts toward tighter PAN standards. The draft law also encompasses plans including inclusion of crypto transactions in income tax filing and the official recognition of CBDC (e‑rupee) as valid electronic payment method.
