The income tax department has brought a significant compliance update for taxpayers who choose to take the Presumptive Taxation Scheme under Section 44AD. New financial disclosure must be made while filing ITR‑4 starting from April 1, 2026 from now on.
This is to increase transparency and alignment of income reported with financial information available to the tax authorities.
What Is New?
Taxpayers who opt for Section 44AD will now be required to report:
- Aggregate closing balance of all bank accounts (savings and current).
- Cash‑in‑hand as on March 31, 2026.
- Stock (inventory) details.
These disclosures must be provided in the ITR‑4 form for AY 2026‑27.
Key Highlights
Mandatory Financial Reporting
Taxpayers must disclose consolidated financial positions, including bank balances, cash, and inventory, at the end of the financial year.
Applicability
This applies to:
- Small businesses under Section 44AD.
- Turnover up to ₹2 crore.
- Up to ₹3 crore where at least 95% of receipts are digital.
Consequences of Non‑Compliance
Failure to report accurate details may result in:
- Automated notices from the Income Tax Department.
- Selection for scrutiny.
- Possible tax audit implications.
Detailed Reporting Fields in ITR‑4
The following fields have also become important under the new reporting requirement:
- E15: Sundry Creditors
- E19: Inventories (Stock)
- E20: Sundry Debtors
- E21: Balance with Banks
- E22: Cash‑in‑hand
The reconciliation of these figures with the books and bank statements is now required.
Objective of the Update
Our first aim in this change is to:
- Increase transparency in presumptive taxation.
- Reduce under‑reporting of income.
- Align ITR information with AIS (Annual Information Statement) and TIS (Taxpayer Information Summary).
Eligibility for Section 44AD
Taxpayers eligible for this scheme are:
- Resident individuals
- Hindu Undivided Families (HUFs)
- Partnership firms (excluding LLPs)
Conditions:
- Turnover up to ₹2 crore.
- Up to ₹3 crore if 95% of transactions are digital.
Not applicable to:
- Professionals (covered under Section 44ADA).
- Commission or brokerage‑based businesses.
- Certain restricted business categories.
Important Dates for AY 2026–27
- 31 July 2026: Salaried individuals and non‑business taxpayers.
- 31 August 2026: Business taxpayers (non‑audit cases, including Section 44AD).
Final Note
This update is in transition from simple presumptive taxation to data transparency. Section 44AD still provides ease in tax calculation, but compliance requirements are becoming more structured.
Taxpayers are advised to keep records of their bank balances, cash, and stock properly and check for discrepancies to avoid missed notifications.
