The Income Tax Department has introduced a new disclosure requirement compelling taxpayers opting for the presumptive taxation scheme to report details of their investments in their income tax returns. The move is aimed at strengthening scrutiny mechanisms and addressing concerns around potential underreporting of income.
The change has been incorporated in the updated ITR-4 (Sugam) form notified by the Central Board of Direct Taxes (CBDT). The revised form applies to small businesses with an annual turnover of up to Rs. 2 crore and professionals with gross receipts of up to ₹75 lakh, including doctors, lawyers, chartered accountants, architects, and consultants.
Under the presumptive taxation scheme, eligible taxpayers are permitted to declare income at a fixed percentage of turnover or receipts, thereby reducing compliance requirements such as maintaining detailed books of accounts or undergoing mandatory audits. Businesses are required to declare a minimum profit of 6% of turnover for digital transactions and 8% for cash transactions, while professionals must declare at least 50% of their gross receipts as income.
With the new requirement, taxpayers must now furnish investment-related information alongside their income declarations. This marks the first instance where such disclosures have been sought under the presumptive scheme, signaling a tighter regulatory approach.
Tax experts indicate that the move is designed to identify discrepancies between declared income and actual financial behavior. By analyzing investment patterns alongside reported earnings, authorities will be better equipped to detect cases where income may have been understated.
Officials believe that some taxpayers have been misusing the presumptive scheme by declaring lower profits to reduce tax liability. The additional disclosure is expected to enable data-driven assessments and flag instances where asset accumulation appears inconsistent with reported income levels.
The tax department already relies on data from the Annual Information Statement (AIS), which captures financial transactions such as investments and high-value expenditures. The integration of investment disclosures in ITR-4 will further enhance the department’s ability to cross-verify information and identify anomalies.
Experts caution that incorrect reporting or concealment of income can lead to severe consequences. Penalties for misreporting may go up to 200% of the tax payable, and when combined with applicable tax, surcharge, and cess, the total financial impact can be substantial.
The development underscores the government’s continued efforts to improve tax compliance through enhanced transparency and data analytics, particularly within segments traditionally considered low-risk under simplified tax regimes.
Read More: Jurishour | Tax Law Daily Bulletin : April 22, 2026
