Income Tax Department Flags ₹25,000 Crore in Restaurant Income Under-Reporting

The Income Tax Department has flagged suspected income under-reporting exceeding ₹25,000 crore across India’s restaurant sector.

What Did the Tax Department Find?

An analysis of transaction data from food delivery platforms Swiggy and Zomato reportedly identified around 8,000 restaurants that may have failed to file income tax returns despite tax deducted at source (TDS) being recorded against them.

The estimated tax-related discrepancy involving these establishments is approximately ₹7,500 crore. The assessment covers financial years 2022-23 to 2024-25, while figures for the latest financial year are not yet available.

During FY 2024-25, the identified restaurants reportedly generated nearly ₹2,700 crore through food delivery platforms, with approximately ₹25 crore deducted as TDS.

However, these figures exclude direct dining revenue, which can be three to four times higher than delivery-platform earnings for some restaurants.

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How Were Restaurants Allegedly Hiding Income?

Earlier investigations identified suspected revenue suppression through missing entries in cloud-based billing systems. Authorities estimated that such practices could have resulted in approximately ₹20,000 crore in unreported income.

Investigators also found instances where customer payments were allegedly directed into the personal bank accounts of waiters and other employees. Cash transactions were another area of concern. A previous examination covering nearly 1.8 lakh restaurants reportedly found average income under-reporting of 30% to 35%.

Tax officials subsequently examined approximately 70 establishments more closely and issued communications to over 900 restaurants seeking explanations or payment of outstanding dues.

What Action Is the Department Planning?

The department is considering a targeted, data-driven compliance exercise to identify restaurants suspected of understating earnings or failing to meet tax obligations.

The latest assessment focuses on individual establishments, many reportedly earning between ₹2 crore and ₹5 crore annually. Authorities expect discrepancies to be particularly significant in metropolitan areas and other major cities. Earlier compliance campaigns used transaction records to identify discrepancies and encourage voluntary correction.

The findings highlight how digital transaction records can help authorities identify possible gaps between reported income and actual business activity. However, the suspected discrepancies remain subject to verification, and the figures should not be treated as established tax evasion until the relevant assessments are completed.