The landscape of financial compliance in India is set for a major overhaul. The Central Board of Direct Taxes (CBDT) recently unveiled the draft rules for the New Income Tax Act 2025, introducing a wave of relaxations for everyday consumers and small businesses. Aimed at reducing "paperwork fatigue," the new framework significantly raises the threshold for quoting a Permanent Account Number (PAN) across several categories.
These changes, which are currently open for public feedback, are expected to be finalized by early March and will officially take effect from April 1, 2026.
Major Relief: PAN Exemption for Cash Transactions
In a move that will likely cheer small traders and individual taxpayers, the New Income Tax Act 2025 proposes a massive hike in the limit for cash transactions.
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The New Rule: PAN will now only be mandatory if your total cash deposits or withdrawals exceed ₹10 lakh in a single financial year.
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The Current Contrast: Presently, banks require a PAN for any cash deposit exceeding ₹50,000 in a single day.
By shifting the focus from daily limits to an annual aggregate, the Income Tax Department aims to simplify banking for those who handle frequent but smaller amounts of cash, while still maintaining oversight on high-value annual movements.
Hospitality and Lifestyle: More Room to Spend
For those planning weddings or large family dinners, the documentation burden has been halved. The PAN requirement for hotel and restaurant bills is being increased from the current ₹50,000 to ₹1 lakh.
This revised limit also extends to:
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Convention Centers: Ideal for corporate bookings.
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Event Management: Simplifying payments for planners and decorators.
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Property Deals: For real estate, the PAN threshold has been pushed from ₹10 lakh to ₹20 lakh, reflecting the rising cost of property in urban India.
Wheels and Wealth: New Rules for Vehicles and Insurance
The draft rules under the New Income Tax Act 2025 also bring clarity to the automotive sector. Previously, PAN was mandatory for all four-wheeler purchases, regardless of the price. Under the new system:
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Motor Vehicles: PAN is required only for vehicles (including two-wheelers) priced above ₹5 lakh.
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Insurance: A new "account-based relationship" model will be introduced. While PAN will now be mandatory to open an account with an insurance provider, it aims to create a more transparent "permanent customer account" for all future policy dealings.
The Digital Frontier: Crypto and CBDC
The Income Tax Department is also tightening its grip on the digital economy. Cryptocurrency exchanges will now be legally required to share transaction data with authorities. Furthermore, the Central Bank Digital Currency (CBDC) has been formally recognized as an accepted mode of electronic payment, signaling the government's push toward a regulated digital rupee.
Why This Matters Right Now
These reforms represent a shift toward "trust-based taxation." By raising limits on cash transactions and daily spending, the government is reducing the compliance burden on the middle class. However, by integrating crypto reporting and insurance accounts, it is ensuring that "high-value" wealth remains traceable.
What should you do? Taxpayers have until February 22 to submit feedback on these draft rules. If you frequently deal with transactions near these limits, now is the time to review your financial planning for the upcoming 2026-27 fiscal year.
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