Rule 161 Of Draft Income Tax Rules 2026 Mandates PAN For High-Value Cash Transactions

The government has proposed tighter compliance norms under Rule 161 of the Draft Income Tax Rules, 2026, mandating the quoting and authentication of Permanent Account Number (PAN) for certain high-value financial transactions. The move is aimed at improving tax transparency, tracking large cash movements, and curbing tax evasion.

Under the draft rules, banks, cooperative banks and post offices will be responsible for verifying PAN details for specified transactions.

When is PAN Mandatory?

As per Rule 161, individuals must quote their PAN in the following cases:

The responsibility to verify and authenticate PAN rests with banks and cooperative banks regulated under the Banking Regulation Act, as well as post offices through the Post Master General.

For example, if Mr. Ajay Sharma deposits ₹30 lakh in his bank account during a financial year, he must quote his PAN. The bank is required to check and authenticate it.

Who is Exempt from Quoting PAN?

The draft rules also outline specific exemptions.

PAN quoting is not required if the transaction is carried out by the Central Government, a State Government, or a Consular Office.

Additionally, non-resident individuals (excluding companies) or foreign companies are exempt if:

• The transaction is conducted through an International Financial Services Centre (IFSC) banking unit, and
• They do not have any income taxable in India.

For instance, a foreign company with no taxable income in India depositing ₹60 lakh in an IFSC account would not be required to quote PAN.

PAN Authentication Process

The PAN submitted for such transactions must be authenticated electronically. This process will be handled by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems).

Read more: Quant Mutual Fund Revises Fund Management Roles Across 12 Schemes from February 20, 2026.

Conclusion

Rule 161 marks another step toward strengthening financial oversight and improving tax compliance. By mandating PAN for high-value cash transactions, the government aims to plug leakages, enhance accountability, and build a more transparent financial system.

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