New Income Tax Act: The new Income Tax Act will come into effect on April 1, 2026. The Income Tax Department has released draft rules for this Act. It sets limits on the mandatory use of PAN for various financial transactions.
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New Income Tax Act: The draft of the new Income Tax rules has been released. It states that quoting a Permanent Account Number (PAN) will not be required for motor vehicle transactions worth less than ₹5 lakh. This means that anyone buying or selling a car, other vehicle, or motorcycle worth less than ₹5 lakh will not be required to provide their PAN. Currently, quoting a PAN is mandatory for buying or selling a vehicle. If the vehicle’s value is less than ₹4 lakh, quoting the PAN number is mandatory.
For which transactions will a PAN be required?
The Income Tax Department has sought comments on the new Income Tax rules by February 22nd. Draft Rule 159 outlines the types of financial and high-value transactions that will require a PAN. This rule states that PAN must be provided when opening a bank or demat account, applying for a credit card, depositing or withdrawing large amounts of cash, purchasing mutual fund units, bonds, or securities, purchasing high-value motor vehicles, or purchasing property. PAN must also be provided when paying a large hotel bill or for an event. Rule 150 aims to track large financial transactions, increase tax compliance, and prevent tax evasion.
PAN must be provided if the transaction value exceeds a certain threshold.
According to the new rule, if a person deposits or withdraws ₹10 lakh or more in cash from one or more bank accounts in a financial year, they must provide their PAN. Currently, PAN must be provided if cash deposits exceed ₹50,000 in a bank account in a single day. PAN must be provided if a hotel, restaurant, convention center, or banquet hall bill exceeds ₹1 lakh. Currently, PAN must be provided if the hotel or restaurant bill exceeds ₹50,000.
New Income Tax Rules to Come into Effect from April 1
Finance Minister Nirmala Sitharaman announced in the Union Budget on February 1 that the Income Tax Act, 2025, will come into effect on April 1 of this year. This Act will replace the Income Tax Act, 1961. The number of rules in the new Income Tax Act has been reduced. An effort has been made to simplify the language of the rules. The new rules can be easily understood by the common person, eliminating the need for a tax expert. The language of the Income Tax Act, 1961, is not simple, causing difficulties for taxpayers.
