Jun 05 2026
13 min read
ITR-4, also known as Sugam, is an income tax return form prescribed for taxpayers who opt for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE. It is mainly used by individuals, HUFs, and firms engaged in small businesses or professions, where income is declared at a fixed rate based on turnover or receipts. This scheme reduces compliance as taxpayers do not need to maintain detailed books of accounts and can report income on a presumptive basis. In simple words, ITR-4 is the government's way of making tax filing easier and simpler for small taxpayers who run their own businesses or provide professional services.
ITR-4 is an income tax return for resident individuals, HUFs, and firms with total income up to ?50 lakh having business or professional income under the presumptive taxation scheme as per Sections 44AD, 44ADA, or 44AE, along with salary, one house property, and other incomes.
The three sections under which you can file ITR-4 are explained below:
Under Section 44AD, small business owners whose total business turnover does not exceed ?2 crore can declare their income at a minimum of 8% of their turnover, or 6% if the turnover is received through digital or non-cash channels. The Section 44AD limit is increased to ?3 crore provided the amounts received and payments made during the previous year in cash do not exceed 5% of the total gross receipts and total gross payments of such previous year. This covers shopkeepers, traders, retailers, and any small business owner who does not fall under a profession.
Under Section 44ADA, specified professionals can declare 50% of their gross professional receipts as their income without maintaining detailed books. Under Section 44ADA, professionals such as doctors, lawyers, architects, and freelancers can opt for presumptive taxation, where 50% of total professional receipts are treated as income and maintaining detailed books of accounts is not required if income is declared correctly. The gross receipts limit for this section is ?50 lakh, which is extended to ?75 lakh if 95% or more of the receipts are received through digital or non-cash channels.
Under Section 44AE, the scheme applies to taxpayers who are in the business of plying, hiring, or leasing goods carriages and own not more than 10 such vehicles at any point during the financial year. Income is computed on a per-vehicle per-month basis under this section.
In addition to business or professional income, ITR-4 filers can also have salary or pension income, income from up to two house properties, income from other sources such as interest, family pension, and dividends, and agricultural income up to ?5,000. Long-term capital gains income on equity shares and mutual funds up to ?1.25 lakh under Section 112A can also be reported in ITR-4, provided there are no carried-forward capital losses.
Freelancers such as bloggers, content writers, digital marketers, and other online professionals can also file ITR-4 under Section 44ADA, as their income is treated as professional income under the presumptive scheme.
A person whose income from salary, house property, or other sources is more than ?50 lakh cannot file ITR-4 for AY 2026-27. A person who is a director in a company, or has invested in unlisted equity shares, or has any brought-forward or carry-forward loss under the head business or capital gains cannot file ITR-4 for AY 2026-27.
Additionally, you cannot file ITR-4 if your business turnover exceeds the prescribed limits under the relevant section, if you are a Non-Resident Indian or RNOR, if you are an HUF that is a partner in a firm, if you have any foreign assets or foreign income, or if you have short-term capital gains or LTCG exceeding ?1.25 lakh. LLPs, even though they are firms, cannot file ITR-4 and must file ITR-5 instead.
There is also a very important continuity condition under Section 44AD that assessees must be aware of. If you opt for the scheme in AY 2026-27, you must continue it until AY 2031-32. If you opt out in between, you become ineligible for the next five assessment years. This is a critical commitment that many small business owners overlook when first opting into the presumptive scheme.
ITR-4 now allows taxpayers to report income from up to two house properties, compared to only one house property previously. The before and after 23rd July 2024 reporting requirement for capital gains has been removed for AY 2026-27. New fields have also been added for reporting F&O turnover and income.
Additionally, for AY 2026-27, there is mandatory disclosure of investments under the presumptive scheme. Tenant, owner, and co-owner details are now required for house property income. Disclosure of political party name and PAN is required for claiming deduction under Section 80GGC.
The last date to file ITR-4 for FY 2025-26 (AY 2026-27) was changed in Budget 2026 to 31st August 2026 for non-audit taxpayers. This is different from ITR-1 and ITR-2, which have a deadline of 31st July 2026. This extended deadline gives small business owners and professionals some additional time to gather their financial records and file accurately.
While the presumptive taxation scheme reduces compliance complexity, many taxpayers still make errors that can trigger notices, delays in refunds, or penalties. Common mistakes include selecting the wrong form, miscalculating presumptive income, not reporting all income sources, ignoring Form 26AS mismatches, entering incorrect bank details, and skipping ITR verification. ITR-4 may appear simple on the surface, but the errors committed while filing it can have serious consequences. Here are all the major mistakes that assessees commonly commit while filing ITR-4 for AY 2026-27.
Many assessees file ITR-4 out of habit without checking whether they still qualify for the presumptive taxation scheme. If your turnover has crossed the prescribed limits, if you have acquired foreign assets, if you have become a director in a company, or if you have short-term capital gains during the year, you are no longer eligible for ITR-4 and must shift to ITR-3. Many notices arise not because of tax evasion but due to reporting errors and incorrect return filing. Taxpayers should carefully review updated eligibility conditions before filing returns for AY 2026-27.
This is a very specific and increasingly common mistake. Many taxpayers wrongly classify professional income as income from other sources merely to continue filing the simpler ITR-1 form. The most common mistake is filing ITR-1 even though the taxpayer has business, freelance, or professional income. This can make the return defective and may trigger a notice, tax demand, or interest. Freelancers, doctors working as consultants, content creators, and tuition teachers who earn fee income must file ITR-4 under the presumptive scheme, not ITR-1.
Under Section 44AD, you must declare at least 8% of your turnover as income, or 6% if receipts are through digital channels. Under Section 44ADA, you must declare at least 50% of your gross receipts as income. Many assessees declare income lower than these prescribed percentages thinking they can get away with it. This is a serious mistake. If you declare income below the prescribed percentage, you lose the benefit of the presumptive scheme for the next five consecutive years and are required to maintain books of accounts and get them audited for that entire period. This is a consequence many small business owners discover only after it is too late.
The foundation of ITR-4 is the correct reporting of your total business turnover or professional gross receipts, from which your presumptive income is calculated. Many assessees underreport their turnover either accidentally because of incomplete records, or deliberately in an attempt to reduce their tax liability. If you are GST registered, a mismatch between your GST turnover and the turnover reported in your ITR can trigger notices. The Income Tax Department directly cross-verifies your ITR-4 turnover with the GST returns you have filed, so any discrepancy is immediately visible and will attract scrutiny.
This is a mistake that costs many assessees money unnecessarily. Under Section 44AD, if 95% or more of your receipts are received through digital or non-cash channels, you are eligible to declare only 6% of turnover as income instead of the standard 8%. Similarly, under Section 44ADA, the gross receipts limit is extended to ?75 lakh if 95% of receipts are non-cash. Many assessees do not maintain proper records of how their receipts were received, cash or digital, and end up declaring income at 8% even when they were entitled to the lower 6% rate, paying more tax than required.
This is a very common mistake specific to ITR-4. Even under presumptive taxation, you must carefully report turnover, cash balance, bank balance, and basic balance sheet figures in the Financial Particulars section. Many taxpayers assume they can skip these details because they have opted for Section 44AD, 44ADA, or 44AE. That is not correct. Leaving this section blank or filling it with incorrect figures results in a defective return notice under Section 139(9) of the Income Tax Act.
Many ITR-4 filers focus only on their business or professional income and completely forget to report their other income sources. Interest earned from savings accounts and fixed deposits, dividends from shares or mutual funds, rental income from house property, and family pension must all be reported in the appropriate sections of ITR-4. The Income Tax Department receives this information from banks and financial institutions through AIS, and any omission will show up as a mismatch and result in a notice.
Ignoring Form 26AS mismatches is one of the most common errors in ITR-4 filing. Before filing, taxpayers should reconcile their income disclosures and tax credits with Form 26AS and the Annual Information Statement to avoid underreporting or overreporting of income. Many small business owners and professionals do not even know what AIS is or how to access it. As a result, they file their ITR-4 based only on their own records and end up with significant mismatches that trigger department notices after filing.
This is perhaps the most financially damaging mistake an ITR-4 assessee can commit. If you have been filing ITR-4 under Section 44AD and you decide to opt out in any year by declaring income lower than 8% or 6%, you immediately lose the ability to use the presumptive scheme for the next five consecutive years. During this period, you are required to maintain full books of accounts, get them audited by a chartered accountant, and file ITR-3. Many assessees opt out in a particular year for various reasons without realising this five-year lock-out consequence and end up with significantly higher compliance costs for years afterward.
For AY 2026-27, the new tax regime is the default regime. Under the new regime, popular deductions like Section 80C for investments in PPF and LIC, Section 80D for health insurance premiums, and HRA exemption are not available. Deductions like 80C and 80D are not allowed in the new regime. Business income under 44AD or 44ADA is still computed presumptively. If you opt out of the new regime and choose the old regime, you must file Form 10-IEA if applicable. Many ITR-4 assessees continue claiming these deductions under the new regime out of habit, leading to incorrect tax computation.
This is a very important procedural mistake specific to assessees with business income. If you have business income under the presumptive scheme and want to file your ITR-4 under the old tax regime instead of the default new regime, you must file Form 10-IEA before the due date of filing your return. Many assessees are unaware of this requirement and simply select the old regime in their ITR-4 without filing Form 10-IEA, which makes their regime selection invalid and can result in their deductions being disallowed.
For AY 2026-27, ITR-4 allows reporting of Long-Term Capital Gains from listed equity shares and equity-oriented mutual funds under Section 112A, provided the gains do not exceed ?1.25 lakh and there are no carried-forward capital losses. Many assessees make the mistake of reporting LTCG in ITR-4 even when it exceeds ?1.25 lakh, which makes them ineligible to use ITR-4 for this purpose at all. In such cases, they must shift to ITR-3 and report their gains there.
This simple but serious mistake affects the assessee's ability to receive tax refunds. Many ITR-4 filers, especially small shopkeepers and traders who file their own returns without professional help, enter incorrect bank account numbers or IFSC codes. If your bank details are wrong, any refund due to you will fail to credit and you will have to go through the lengthy process of a refund reissue request on the income tax portal.
Many ITR-4 assessees are unaware that the due date for their form is 31st August 2026, not 31st July 2026 like ITR-1 and ITR-2. Some assessees panic thinking they have missed the deadline when they see the 31st July deadline mentioned in news articles, not realising it applies to different forms. Conversely, some assessees become complacent thinking they have extra time and end up rushing their filing close to the August 31 deadline and making avoidable errors in the process.
This is the final and most commonly overlooked step. Submitting your ITR-4 on the income tax portal is not the end of the process. Your return is only valid after it is e-verified within 30 days of filing. If you do not e-verify within this period, your return is treated as invalid and is considered as if it was never filed at all. E-verification can be done instantly through your Aadhaar OTP, net banking login, or by sending a signed ITR-V to the CPC office in Bengaluru.
ITR-4 under the presumptive taxation scheme is genuinely one of the most taxpayer-friendly return forms available in India. It eliminates the need for detailed bookkeeping and simplifies tax compliance for millions of small business owners and professionals. However, simplicity does not mean carelessness. For AY 2026-27, with new disclosure requirements, extended deadlines, GST cross-verification, and tighter AIS matching, every ITR-4 assessee must approach their filing with proper preparation. Always gather your records, reconcile your AIS and Form 26AS, calculate your turnover carefully, choose your tax regime after comparison, and file well before the deadline. When in doubt, always take the help of a qualified chartered accountant to ensure error-free compliance.
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