The Central Board of Direct Taxes (CBDT) has published draft rules that will change when you need to quote your PAN. The core idea: move from daily limits to annual aggregates, making life easier for most families and small businesses. Here’s everything you need to know, with practical examples.

The old rules vs. the draft 2026 rules

Here’s a side‑by‑side comparison of the key transaction limits. The new limits are annual aggregates unless specified.

Cash transactions: why the new limit matters

Imagine you run a small kirana store. During Ganesh festival, you deposit ₹2 lakh over ten days. Under old rules, you’d need to show PAN each time you crossed ₹50,000. Under the new rules, those ten deposits add up to ₹2 lakh — well below the ₹10 lakh annual limit — so no PAN required. The same applies for a family receiving wedding gifts totalling ₹4 lakh across a few months. Only if your total annual cash turnover (deposits + withdrawals) exceeds ₹10 lakh will you need to quote PAN for any further cash transactions that year.

What counts toward the ₹10 lakh?

Both deposits and withdrawals across all your bank accounts (savings, current, joint accounts) linked to your PAN. So if you withdraw ₹6 lakh for a medical emergency and deposit ₹5 lakh from gifts, you’ve already used ₹11 lakh, and any further cash transactions that year require PAN. The limit is PAN‑specific, so if your spouse has their own PAN, their transactions are separate.

Property transactions: threshold doubled

The draft rules raise the PAN‑quoting threshold for buying or selling property from ₹10 lakh to ₹20 lakh. That means if you’re buying a residential plot or a small flat priced at, say, ₹18 lakh, you won’t need to quote PAN at the time of registration — though state stamp duty authorities may have their own requirements. For properties above ₹20 lakh, PAN remains mandatory. This change particularly helps in smaller cities and towns where many transactions fall in the ₹10–20 lakh range.

Vehicle purchases: two‑wheelers now in scope

Earlier, only cars and SUVs costing over ₹10 lakh required PAN. The draft brings in all motor vehicles — including two‑wheelers — priced above ₹5 lakh. So if you’re buying a high‑end motorcycle (like a Royal Enfield Classic 350, whose on‑road price in many states exceeds ₹5 lakh), you’ll need to provide PAN at the time of registration. Commercial vehicles and tractors remain exempt.

Insurance: the only area where rules tighten

While most rules are becoming more liberal, life insurance gets stricter. Currently, PAN is needed only if the annual premium exceeds ₹50,000. Under the draft, any new policy that creates an “account‑based relationship” (basically, any policy where premiums are paid periodically) will require PAN from day one, regardless of premium amount. This is to prevent money laundering through small policies. ULIPs and traditional plans both covered. If you already have policies, you don’t need to relink them — but for new purchases, be ready with your PAN.

Business owners: a 7‑point action plan

How small traders and families benefit

Take the example of a vegetable vendor in a city market. During peak seasons, she might deposit ₹2,000–5,000 daily. Over a year, her total cash deposits could be ₹4–5 lakh — well within the ₹10 lakh limit. No PAN needed ever. A family receiving gifts at a wedding might see ₹3 lakh in cash over two weeks — again, no PAN required. The new rules take the daily pressure off and let you plan your finances without fear of a PAN demand at the bank counter.

What the tax department sees

Just because you don’t quote PAN doesn’t mean the transaction is invisible. Banks will still report all cash transactions above ₹2 lakh to the income tax department through the Statement of Financial Transactions (SFT). This data populates your Annual Information Statement (AIS). The department’s AI looks for patterns: for example, if a person with a declared income of ₹6 lakh shows ₹9 lakh in cash deposits, it may trigger a query. But routine family gifts or small business flows are unlikely to raise eyebrows.

Timeline: when these rules take effect

• February 22, 2026: Last date to send comments to CBDT.
• March 7, 2026: Expected notification of final rules.
• April 1, 2026: Rules come into force for FY 2026‑27.

Until March 31, 2026, the old daily limits apply. So if you’re making a large cash deposit before April, you may still need PAN.

Common myths — and the reality

• “No PAN means no tracking.” False. All transactions above ₹2 lakh are reported to the IT department.
• “Only deposits count toward the limit.” False. Withdrawals are included too.
• “The rules are final.” No, they’re draft; feedback can change them.
• “NRE accounts are exempt.” No, all accounts under your PAN are aggregated.
• “Businesses have separate limits.” Only if the business has a different PAN (e.g., a company). Sole proprietors share the same limit.
• “Two‑wheelers are always exempt.” Not if the on‑road price exceeds ₹5 lakh.
• “Hotel bills under ₹1 lakh never need PAN.” True under new rules, but old rules apply till March 31.
• “I can split cash across banks to avoid PAN.” No, all banks report, and the department aggregates.
• “No penalty for not quoting PAN when required.” Section 272B provides for a penalty of up to ₹10,000.
• “PAN‑Aadhaar linking isn’t urgent.” If not linked by March 31, 2026, your PAN becomes inoperative.

Frequently asked questions

Your compliance checklist

What happens if you ignore the rules?

If you cross the ₹10 lakh cash limit and continue to make cash transactions without quoting PAN, the bank may still accept the deposit, but the transaction will be reported. The income tax department may send an alert or notice if your AIS shows high cash turnover inconsistent with your income profile. In most cases, if you can explain the source (e.g., wedding gifts, small business receipts), it’s fine. But deliberate evasion can lead to penalties.

How to submit your feedback on the draft

The CBDT is accepting comments until February 22, 2026. If you think the cash limit should be higher, or that certain transactions should be exempt, you can write to them. Here’s how:

1. Go to incometaxindia.gov.in and look for “Draft Income Tax Rules 2026”.
2. Download the draft and the prescribed comment format (Form DR-1).
3. Fill in your suggestions (be specific, with reasons).
4. Email to dst2016@nic.in before the deadline.

Article by CMA Knowledge Team. Sources: CBDT draft notification, Income Tax Act, public consultations. Updated February 20, 2026. Word count: ~2,100.

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