Draft income tax rules: Earlier this month, the Central Board of Direct Taxes (CBDT) released the draft income tax rules, which are scheduled to come into force from 1 April 2026. The draft rules propose changes to the limits on mandatory quoting of the taxpayer’s Permanent Account Number (PAN).
While these proposals are still under consideration, they signal an effort to ease compliance for routine transactions while maintaining strict oversight over high-value cash transactions.
“The objective behind revising the PAN quoting norms appears to be to align compliance requirements with present-day economic realities. The idea is to ease the reporting burden for routine transactions, while at the same time tightening monitoring of high-value financial dealings through better data tracking — ultimately improving transparency and helping curb tax evasion,” Abhishek Soni, CEO of Tax2Win, told Livemint.
Here’s a closer look at where quoting PAN is proposed to be mandatory as per the draft rules:
1. Cash transactions
In the draft income tax rules, it has been proposed to make quoting the PAN mandatory if you withdraw or deposit over ₹10 lakh in aggregate in a financial year. However, if the transaction value exceeds ₹20 lakh, PAN must be quoted and verified, adding an additional layer of authentication.
2. Purchase of motor vehicle
The draft rules have relaxed compliance for motor vehicle transactions. The rules propose furnishing PAN details when purchasing or selling vehicles worth over ₹5 lakh. As per the existing rules, all motor vehicle transactions, except motorbikes, require mandatory quoting of PAN details.
3. Hotels and restaurant bills
As per the current rules, PAN is mandatorily required at hotels and restaurants for payments exceeding ₹50,000. However, the draft rules propose to relax this limit to ₹1 lakh.
4. Property transactions
According to the current rules, quoting PAN is mandatory for immovable property transactions worth ₹10 lakh. The draft rules have proposed to increase this limit to ₹20 lakh.
5. Insurance policies
Until now, quoting PAN was not mandatory if your insurance premium was less than ₹50,000. The PAN is required only when the annual insurance premium exceeds the sum of ₹50,000. Under the draft rules, the requirement is proposed to be significantly expanded. Instead of focusing only on the premium amount, the draft requires PAN to be quoted for any account-based relationship with an insurance company. So, if this comes into effect, quoting PAN will become mandatory even if your premium is less than ₹50,000.
When does PAN become inoperative?
As per the draft income tax rules, your PAN can become inoperative if you do not link it to your Aadhaar number within the prescribed time. This is an existing position under the draft Income-tax Rules. If your PAN is inoperative, you cannot claim income-tax refunds, and no interest will be paid on such refunds for the period during which the PAN remains inactive. The PAN can become operative again only after you complete Aadhaar linking and pay any prescribed fee, in accordance with the rules.
