The Central Board of Direct Taxes (CBDT) has proposed major changes under the new Income Tax Rules, 2026, which will come into effect from 1 April 2026 in India. One of the most talked‑about reforms is the increase in the transaction value threshold for mandatory quoting of PAN (Permanent Account Number). Under the draft rules, buyers of cars or bikes worth less than ₹5 lakh will no longer need to quote their PAN for the purchase — a significant simplification aimed at reducing compliance burdens.
What’s Changing? Understanding the New PAN Rule
Previously, quoting PAN was mandatory for most vehicle purchases, including cars and other motorized transport, irrespective of the value of the vehicle. This meant even someone buying a low‑priced vehicle had to provide their PAN in the sale documentation.
Under the draft Income Tax Rules, 2026, the rule is now proposed to be changed as follows:
- 🟢 PAN will be required only if the price of the motor vehicle (car or bike) is above ₹5 lakh.
- 🟢 For purchases below ₹5 lakh, quoting PAN will not be necessary.
- 🔵 This change applies to both four‑wheelers and two‑wheelers (motorcycles and scooters).
This threshold is part of several revisions designed to align PAN reporting requirements with transaction value and administrative practicality.
Why This Change Matters
1. Less Paperwork for Everyday Buyers
Many everyday buyers — especially first‑time car or bike purchasers, students, and entry‑level commuters — frequently buy vehicles priced below ₹5 lakh. With this change:
- Buyers won’t have to share their PAN with dealers for smaller‑value purchases.
- This reduces documentation hassles and makes the purchase process smoother.
2. Simplifying Compliance
The indian tax regime is moving toward value‑based reporting thresholds, meaning only higher‑value transactions need detailed tax tracking. This helps taxpayers avoid unnecessary compliance for small transactions.
3. Balancing Tax Tracking with Convenience
The government aims to track significant financial flows without burdening ordinary purchases. For high‑value vehicle transactions (above ₹5 lakh), PAN will still be required to help monitor funds and ensure proper tax reporting.
What This Doesn’t Change
Even though PAN may not be needed for vehicles under ₹5 lakh:
- PAN is still required for many other financial transactions, like filing tax returns, large cash deposits/withdrawals, property transactions above a certain limit, and high‑value payments to hotels or restaurants as per the revised thresholds.
- You still need PAN for income tax filings and statutory obligations — not having to provide PAN for a vehicle purchase doesn’t affect your PAN requirements elsewhere.
How It Works in Practice
Here’s a simple example:
✔️ Vehicle Purchase Below ₹5 Lakh
- You buy a motorcycle worth ₹1.8 lakh.
- PAN is not required to be quoted at the time of sale (as per the draft rule).
✔️ Vehicle Purchase Above ₹5 Lakh
- You buy a car worth ₹8 lakh.
- PAN must be quoted for compliance and reporting.
Other PAN Threshold Changes in the New Rules
These draft rules also adjust PAN quoting limits for other transactions, such as:
- Cash deposits or withdrawals – mandatory PAN for ≥ ₹10 lakh in a financial year (up from ₹50,000 per day).
- Property transactions – PAN required for dealings above ₹20 lakh (up from ₹10 lakh).
- Hotel and restaurant payments – PAN required only for bills above ₹1 lakh (up from ₹50,000).
These changes are intended to reduce unnecessary compliance for low‑value financial activities while focusing enforcement efforts on material transactions.
What You Should Know Before April 2026
👉 The rules are currently in draft form and open for public feedback until 22 February 2026. The CBDT will finalize and publish them before they take effect on 1 April 2026.
👉 Final thresholds and specifics may evolve slightly based on stakeholder feedback, but the direction toward higher PAN thresholds for everyday transactions is expected to remain.
Conclusion
The proposed change in the new Income Tax law — where PAN is not required for purchasing cars or bikes under ₹5 lakh — is part of a broader effort to make tax compliance more efficient and less burdensome for ordinary taxpayers. It simplifies paperwork for common vehicle purchases while ensuring higher‑value transactions remain transparent and within the tax reporting framework.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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