Income Tax Department Verifies Restaurant Turnover Across India

The Income Tax Department has recently carried out a nationwide verification exercise focusing on restaurants that may have suppressed their actual turnover. This action comes after an investigation conducted in November 2025 which pointed towards possible tax irregularities in the Food and Beverage (F&B) sector.

During the earlier investigation, authorities noticed that some restaurants might have manipulated their billing systems to reduce the sales figures reported in their tax returns. In certain cases, bulk bills were allegedly deleted or transaction records were modified. Such practices can lead to lower turnover being shown in financial records and income tax filings.

To examine the matter more closely, the department analysed transactional data of around 1.77 lakh restaurants across the country. Using AI-based data analytics tools, the authorities compared this transaction data with the turnover declared by these restaurants in their Income Tax Returns (ITR). The analysis revealed several cases where the reported income did not match the actual sales data.

Based on these observations, the Income Tax Department conducted surveys on 8 March 2026 covering 62 restaurants located in 46 cities across 22 states. Initial findings indicate that sales worth approximately ₹408 crore may have been suppressed. Detailed verification and investigation are still in progress to determine the exact extent of the discrepancies.

At the same time, the department is also encouraging voluntary compliance among taxpayers. Under the SAKSHAM NUDGE initiative, businesses identified during the data analysis are being advised to review their tax filings and correct any mismatches.

In the first phase of this initiative, nearly 63,000 restaurants are expected to receive communication from the department requesting them to update their returns under Section 139(8A) of the Income Tax Act before 31 March 2026. This step allows taxpayers to revise their returns and rectify errors.

The use of data analytics and digital verification tools shows the government’s increasing focus on improving transparency and compliance in the restaurant and hospitality sector.