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India's tax system is undergoing a major change with new Income Tax Rules taking effect April 1, 2026. A new form, Form 97, will replace the old Form 60, but it will have much less scope. The main goal is to get more people into the formal financial system by requiring the Permanent Account Number (PAN) for a wider range of high-value transactions. This move signals a strong push for greater economic transparency, fewer informal deals, and better tax collection nationwide. The flexibility of the old Form 60 is significantly reduced, marking a clear shift towards a financial system centered on PAN. Experts expect more people to apply for PAN cards to continue accessing important financial services and making large purchases.
The updated rules require PAN for a wider array of transactions to better track financial activity. Buying motor vehicles over ₹5 lakh now definitely needs a PAN. Investments in mutual funds, debentures, or RBI bonds above ₹50,000 also require it. For property transactions, the PAN threshold is now ₹20 lakh, doubling the previous limit. Opening demat accounts and applying for credit cards are strictly dependent on having a PAN. Even large bills at hotels or convention centres over ₹1 lakh now need PAN disclosure, up from ₹50,000. This aligns with global efforts in digital identity checks and 'Know Your Customer' (KYC) rules, aiming for compliance based on data and reducing the unofficial economy. This change is expected to significantly reduce yearly non-PAN declarations, from about 12.5 crore to under 2 crore. While this will simplify reporting for businesses, it could immediately block access for those without a PAN.
Despite the goals of simplification and better transparency, the reduced scope of Form 97 creates immediate barriers for many people. Those without a PAN will be unable to access important financial markets and make large purchases. This could worsen financial exclusion, especially for people in rural or smaller towns, or those who mainly deal in cash. Requiring PAN for things like opening demat accounts or investing in mutual funds, even with small sums, limits how non-PAN holders can build wealth. The new reporting system, designed for transparency, might also increase compliance work for businesses and financial services, particularly as they adapt to reporting for Form 97 using Form 98. Historically, government tax reforms, though often presented as simple, have sometimes added complexity, and this change might prove similar. Children are also excluded from using Form 97 and must use their parents' or guardians' PANs, adding another dependency.
This rule change is a key step towards India's long-term goals of formalizing the economy and improving financial tracking. It fits with global trends for stronger digital ID checks and anti-money laundering rules. By making PAN almost essential for financial activities, the government is building a foundation for better data analysis and tax enforcement. While some may face minor issues initially, the expected result is a more connected, transparent, and digital financial sector. This could spur innovation in compliance tools and digital identity services. The change also supports India's wider push for digitalization, aiming to connect the informal and formal economies. However, regulators will need to watch closely to ensure it doesn't unfairly affect financial inclusion for vulnerable groups.