PAN rule changes in draft Income-tax Rules 2026: New Limits for Cash, Property, Vehicles

In India, PAN is not just for filing returns. It is the number that quietly shows up when you buy a vehicle, book a banquet, purchase property, or move large amounts of cash through banks.

Now the Income Tax Department has released the Draft Income-tax Rules, 2026, which are meant to align with the Income-tax Act, 2025 and replace older rule frameworks. These draft rules say they will come into force from April 1, 2026, once notified as final.

So what is changing, and where will you feel it in day-to-day life?

This article breaks it down with thresholds, examples, and a simple checklist.

First, what is "draft" here and why should you care

These are draft rules, not the final law yet. The government has invited comments and the final version can still change.

Still, this matters because banks, insurers, dealerships, and property registration ecosystems update their KYC and reporting systems early. When rules become final, the "PAN required" prompt can start showing up immediately in real transactions.

The 5 PAN changes that can impact daily transactions

1. Buying a motor vehicle: PAN becomes threshold-based

Current practice: PAN is required for most motor vehicle purchases (with specific exclusions such as two-wheelers).

Draft proposal: PAN will be required only if the transaction value exceeds ₹5 lakh, and the scope is adjusted to include motorcycles and exclude tractors.

What it means in real life:

• If you buy a premium motorcycle for ₹5.8 lakh, PAN will likely be asked.
• If you buy a small car or used car below ₹5 lakh (invoice value), PAN may not be mandatory under this specific rule, if the draft becomes final.

Note: Even when PAN is not mandatory under one rule, sellers may still ask it as part of standard KYC.

2. Cash payments at hotels, restaurants, banquet halls: threshold doubles

Current rule: PAN is required for cash payments above ₹50,000 at one time.

Draft proposal: threshold increases to ₹1,00,000.

What it means:

• Paying a hotel bill of ₹80,000 in cash may no longer trigger mandatory PAN quoting under this rule
• Paying ₹1.25 lakh in cash for a banquet or event service will likely require PAN.

This change mainly affects people who pay large lifestyle or event bills in cash, which is still common in weddings and functions

3. Life insurance: PAN shifts from premium limit to onboarding stage

Current rule: PAN quoting is linked to life insurance premium above ₹50,000 per year.

Draft proposal: this is replaced by PAN requirement at the start of an "account-based relationship," which effectively means PAN becomes part of onboarding and applies across related transactions.

What it means:

• Earlier, a ₹25,000 annual premium policy might not trigger PAN.
• Under the draft approach, you may be asked for PAN even for smaller policies because the requirement is tied to relationship creation, not premium size.

This is a big behavioural change because it reduces ambiguity for insurers and makes onboarding more uniform.

4. Property transactions: threshold doubles from ₹10 lakh to ₹20 lakh

Current rule: PAN required for property transactions above ₹10 lakh.

Draft proposal: threshold becomes ₹20 lakh.

What it means:

• In many cities, most transactions are anyway above ₹20 lakh, so PAN remains standard.
• In small towns and for low-ticket land, parking, or small resale deals, this can reduce friction

Important: Property transactions still have other tax and reporting requirements. PAN is just one part of the compliance trail

5. Cash withdrawals and cash deposits, annual totals become the key trigger

This is where the draft rules tighten tracking.

Cash withdrawals

• Current reporting trigger: ₹20 lakh or more in a financial year.
• Draft proposal: ₹10 lakh in a financial year.

Cash deposits

Multiple reports on the draft rules indicate a shift from a per-day trigger to an annual aggregate test.

• Draft proposal commonly reported: PAN required for cash deposits aggregating to ₹10 lakh or more in a financial year across one or more accounts.

What it means:

• Earlier, the friction point was "big cash deposited today."
• Now, the tracking lens becomes "how much cash moved in total this year."

Examples:

• If you run a cash-heavy clinic or business and you deposit ₹1 lakh a month, you cross ₹10 lakh over the year and PAN quoting becomes relevant even if no single day looks large.
• If you withdraw ₹90,000 several times a month, the yearly total can cross ₹10 lakh quickly.

This is not about banning cash. It is about strengthening reporting trails for large cash movement.

Old vs proposed: quick comparison table

What changes for you in real life

If you are a salaried professional

• Hotel and event cash payments get some relief because the threshold doubles.
• Life insurance onboarding may require PAN even for smaller premium policies.
• If you rarely use cash, you will barely notice deposit and withdrawal reporting shifts.

If you are self-employed or run a cash-heavy practice or business

• The cash deposit and withdrawal rules are more likely to show up for you.
• Annual totals matter more than single-day spikes now, so tracking yearly cash movement becomes important.

If you are buying a vehicle or property

• Vehicle PAN requirement becomes more logical and threshold-led.
• Property threshold change helps only if the deal is below ₹20 lakh, which is more common outside big cities.

What you should do now

• Keep PAN details consistent across bank KYC, insurance KYC, and major invoices.
• If you deal in cash regularly, track annual totals of cash deposits and cash withdrawals.
• Do not assume splitting cash payments is "safe." Patterns can still be flagged by reporting systems.
• Watch for the final notification and effective date, draft rules can still change.

Final thoughts

These draft PAN changes do two things at once.

They reduce friction for some one-off transactions like modest hotel cash payments and lower-ticket property deals, but they tighten the lens on large cash movement by shifting attention to yearly totals.

If you mostly live in the digital payment world, this will feel like a minor compliance update.

If your income or business runs on cash cycles, this becomes a real operational change, so it is worth preparing early.

FAQs

1. Are these PAN changes final?

No. These are draft rules. The final rules can change after consultation. The draft rules mention an intended commencement from April 1, 2026.

2. What is the new proposed PAN limit for cash hotel or restaurant payments?

The draft proposes ₹1,00,000 for cash payments (up from ₹50,000).

3. Will PAN be needed for buying a bike?

If the draft becomes final, PAN will be needed for motorcycles if the transaction value exceeds ₹5 lakh.

4. What changes for life insurance?

PAN requirement shifts away from a premium threshold and moves to the onboarding stage of an account-based relationship.

5. What is the proposed PAN threshold for property transactions?

The draft proposes increasing it from ₹10 lakh to ₹20 lakh.

6. What is the proposed threshold for cash deposits and withdrawals?

Draft coverage indicates PAN becomes relevant when cash deposits or cash withdrawals aggregate to ₹10 lakh or more in a financial year.

7.Do these rules apply to online payments too?

Most of the headline changes discussed here are about cash payments and specific transaction categories. Online payments generally leave a bank trail already, but always check the final rule text once notified.

Disclaimer: This article is for general information only, based on public reporting and the Draft Income-tax Rules, 2026. It is not tax or legal advice. Rules may change when finalised and notified.