Small businesses and professionals filing under the presumptive tax scheme face a new disclosure requirement this year. They must now reveal their investment details in the income tax return.
The presumptive taxation scheme simplifies IT compliance for small businesses, professionals, and freelancers. The scheme allows them to declare income as a fixed percentage of turnover without maintaining detailed books of accounts.
The Central Board of Direct Taxes has reportedly introduced this change in the newly released ITR-4 (Sugam) form. The form applies to businesses with a turnover of up to Rs 2 crore and professionals with gross receipts of up to Rs 75 lakh. Doctors, chartered accountants, lawyers, architects and consultants fall under its scope.
The presumptive taxation scheme allows small taxpayers to declare income at a fixed percentage of turnover. It removes the need for mandatory bookkeeping and audits. Businesses must declare a minimum profit of 6% of turnover for electronic receipts and 8% for cash receipts. Professionals must declare 50% of gross receipts as income. If declared profit falls below these rates, accounts must be audited. If higher, tax is paid accordingly.
Tax experts said the move reflects the Income Tax department’s sharper focus on those allegedly misusing the scheme to declare lower-than-actual profits.
They believe the I-T department is now more watchful and aims to catch tax avoidance through misuse of the scheme’s provisions.
This is the first time the department has directly sought investment-related details up to March 31, 2026, in the presumptive tax return. Experts are of the view that the investment declaration will allow authorities to compare declared income with investment patterns and flag cases where spending or asset creation appears disproportionate to reported earnings.
The Annual Information Statement also helps authorities cross-check income declared against investments made.
Financial analysts have cautioned that misreporting income attracts a penalty equal to 200% of tax payable. The applicable tax, surcharge and cess together amount to 39%.
They noted that once undisclosed income is detected, the combined tax and penalty burden works out to 117% of the misreported income.
Also Read: Income Tax Officials Will be Able to Access Your Emails And Social Media Accounts From April 2026 https://www.vibesofindia.com/income-tax-officials-will-be-able-to-access-your-emails-and-social-media-accounts-from-april-2026/
