The new Income Tax Act, 2025, will replace the old Income Tax Act effective April 1, 2026, bringing significant changes to the Permanent Account Number (PAN) system in India. Among the key reforms, two-factor authentication will now be mandatory for all digital payment transactions.

Under the new regulations, Aadhaar alone will no longer suffice for obtaining a PAN card; applicants will need to provide additional documentation. Furthermore, the name on the PAN card must match the details on the Aadhaar card, ensuring a tighter linkage between identity and financial transactions.

Individuals applying for a personal PAN must use Form 93, while companies will use Form 94. Foreign individuals and entities will need to utilize Forms 95 and 96, respectively. These changes are part of a broader effort to enhance compliance and transparency in financial activities.

In terms of financial thresholds, PAN will only be required for banking transactions when total deposits or withdrawals exceed Rs 10 lakh in a financial year. For vehicle purchases, PAN is necessary only if the value exceeds Rs 5 lakh. Additionally, PAN will be mandatory at the start of every insurance policy, regardless of the premium amount, which is set at Rs 50,000 annually.

Moreover, the threshold for mandatory PAN disclosure in property transactions has increased from Rs 10 lakh to Rs 20 lakh. High-value spending at hotels, restaurants, or events will require PAN only when the bill exceeds Rs 1 lakh, streamlining the reporting process for consumers.

Rohit Mahajan commented, “These changes aim to streamline tracking of financial activities and strengthen the linkage between individuals and their transactions.” This marks a significant shift in how financial transactions will be monitored in India.

Historically, the Income Tax Act has governed financial regulations for over six decades, making this overhaul a pivotal moment for the Indian financial landscape. The revised rules are expected to improve compliance and transparency, addressing long-standing concerns about financial accountability.

As the implementation date approaches, observers are keen to see how these reforms will impact everyday financial activities and whether they will effectively enhance transparency in the system. Details remain unconfirmed regarding the full scope of enforcement and compliance measures that will accompany these changes.

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