I-T draft rules proposal: PAN is not needed if the vehicle costs less than Rs 5 lakh

y raising the thresholds, the measure narrows the reporting universe to more material transactions

• PAN now required only for motor vehicle transactions of Rs 5 lakh or more
• Feedback on new PAN rule for vehicle deals open until February 22
• Change aims to reduce compliance for low-value vehicle transactions

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Under the draft income-tax rules released for public consultation, buyers and sellers will no longer be required to quote their Permanent Account Number (PAN) for motor vehicle transactions valued below Rs 5 lakh. Earlier, PAN was mandatory for all vehicle purchases and sales, irrespective of the value.

The proposed change means PAN will now need to be quoted or applied for only if the value of the motor vehicle transaction is Rs 5 lakh or more, a move described as a “realignment in value of transaction”. Taxpayers, professionals and industry stakeholders have time until February 22 to submit their feedback on the draft rules.

According to the draft rules 159, "Transactions in relation to which permanent account number is to be quoted or applied for the purposes of section 262(1)(f), 262(10)(c) and 262(10)(e) of the Act. Every person shall quote his Permanent Account Number in all documents pertaining to the transactions specified below..... namely motor vehicle or vehicle, as defined in section 2(28) of the Motor Vehicles Act, 1988 (59 of 1988), which requires registration by a registering authority under Chapter IV of that Act, except ‘tractor’ as defined in section 2(44) of the said Act; and motor cycle as defined in section 2(27) of the Motor Vehicles Act, 1988 (59 of 1988)."

"Value of transaction: Amount exceeding Rs 5,00,000. Person receiving/issuing the document in relation to the transaction: The person who sells the motor vehicle or motorcycle.”

"Transactions in relation to which PAN is required to be quoted or applied – Realignment in value of transaction – for instance, on sale or purchase of motor vehicle, earlier there was no limit, but now Rs 5 lakh has been brought in," said Sandeepp Jhunjhunwala, Partner, Nangia Global Advisors.

Jhunjhunwala said that the upward revision of transaction thresholds for quoting PAN and financial reporting is a calibrated, risk-based refinement of the reporting framework.

"By raising the thresholds, the measure narrows the reporting universe to more material transactions, reducing the capture of low-value data and associated compliance costs. This rationalisation is expected to enhance the quality and usability of reported information, improve administrative efficiency for reporting entities, and support more targeted and effective tax risk assessment by the Authorities," he added.

Rule 159 broadly explains when a Permanent Account Number (PAN) must be quoted or applied for while carrying out important financial and high-value transactions.

The rule also lists common activities where PAN is compulsory, such as opening bank or demat accounts, applying for credit cards, making large cash deposits or withdrawals, buying mutual fund units, bonds or securities, purchasing high-value motor vehicles, shares, or immovable property, and paying large bills to hotels or for events.

The aim of Rule 159 is to track big financial transactions, improve tax compliance, and prevent tax evasion by linking such transactions to a person’s PAN.