Last updated: August 2026 — FY 2025-26 (AY 2026-27)
ITR-4 (Sugam) is the simplified return form for small businesses and professionals who declare income on a presumptive basis under Sections 44AD, 44ADA or 44AE. It replaced the old ITR-4S form in 2017. This guide explains exactly who can file ITR-4 for FY 2025-26, who is barred from it, and the one rule — the Section 44AD(4) lock-in — that catches out more taxpayers than any other.
Quick answer: You can file ITR-4 if you are a resident individual, HUF or firm (not an LLP), your total income is up to ₹50 lakh, and your business or professional income is declared under the presumptive scheme. If you want to claim actual expenses, carry forward a loss, or your turnover exceeds the presumptive limits, you need ITR-3 instead.
What ITR-4 (Sugam) actually is
Presumptive taxation exists so that small taxpayers do not have to maintain detailed books of account. Instead of computing actual profit, you declare a fixed percentage of your turnover as income, pay tax on that, and your compliance obligation ends there.
ITR-4 is the return form built for that scheme. It is deliberately short: there is no detailed profit & loss account and no full balance sheet — only four summary figures (sundry debtors, sundry creditors, stock-in-trade and cash balance).
Who can file ITR-4 for FY 2025-26
All of the following must be true:
- You are a Resident and Ordinarily Resident individual, a HUF, or a partnership firm other than an LLP
- Your total income does not exceed ₹50 lakh
- Your business or professional income is computed under Section 44AD, 44ADA or 44AE
- You may also have salary/pension, income from one house property, and income from other sources such as interest
- Your agricultural income does not exceed ₹5,000
Who cannot file ITR-4
You are excluded from Sugam if any one of these applies:
- Total income exceeds ₹50 lakh
- You are a director in a company
- You held unlisted equity shares at any time during the year
- You are a Non-Resident or Not Ordinarily Resident
- You own more than one house property
- You have foreign assets, foreign income, or signing authority in any account outside India
- You have brought-forward losses or losses to carry forward under any head
- Agricultural income exceeds ₹5,000
- You are claiming relief under Section 90, 90A or 91 (foreign tax credit)
One relaxation worth knowing: ITR-4 now permits reporting of long-term capital gains under Section 112A up to ₹1.25 lakh — but only where there is no capital loss to carry forward or set off. Any capital gain beyond that, or any capital loss, pushes you to ITR-2 or ITR-3.
Section 44AD — presumptive scheme for small businesses
Section 44AD is the most widely used of the three. It applies to eligible businesses — broadly, any business other than a profession, and excluding agency business, commission or brokerage income, and the business of plying/hiring goods carriages (which has its own section).
| Item | Position for FY 2025-26 |
|---|---|
| Turnover limit | ₹2 crore — raised to ₹3 crore where cash receipts are 5% or less of total receipts |
| Deemed profit — digital receipts | 6% of turnover received via banking channels / electronic modes |
| Deemed profit — cash receipts | 8% of turnover received in cash |
| Books of account | Not required under Section 44AA |
| Tax audit | Not required, provided you declare at or above the deemed rate |
| Expenses | Cannot be claimed separately — the deemed rate is treated as profit after all expenses |
| Depreciation | Deemed already allowed; WDV of assets is still reduced each year |
You may declare more than 6%/8% if your actual profit is higher — and you must, if it is. The scheme sets a floor, not a ceiling.
Section 44ADA — presumptive scheme for professionals
Section 44ADA covers the professions specified under Section 44AA(1): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and other notified professions including film artists, company secretaries and authorised representatives.
- Gross receipts limit: ₹50 lakh — raised to ₹75 lakh where cash receipts are 5% or less of total receipts
- Deemed profit: 50% of gross receipts
- No books of account, no tax audit, no separate expense claim
If your actual profit margin is genuinely below 50% — common for consultants with significant staff or infrastructure costs — declaring under 44ADA means paying tax on income you never earned. In that case regular filing under ITR-3 with actual expenses is usually better. Our guide on tax filing for freelancers and consultants works through both routes.
Section 44AE — goods carriages
For taxpayers who own not more than 10 goods vehicles at any time during the year. Income is computed per vehicle per month:
- Heavy goods vehicle (gross vehicle weight above 12,000 kg): ₹1,000 per tonne of gross vehicle weight, per month or part month
- Other than heavy goods vehicle: ₹7,500 per month or part month, per vehicle
Part of a month counts as a full month, and the vehicle count includes vehicles held on hire purchase or instalments.
The Section 44AD(4) trap — the five-year lock-in
This is the single most misunderstood rule in presumptive taxation, and the one that turns a "simple" scheme into a compliance problem.
Once you declare income under Section 44AD, you are expected to continue for the next five assessment years. If in any of those years you declare profit below the deemed 6%/8% rate, then:
- You are barred from Section 44AD for the following five assessment years
- You must maintain books of account under Section 44AA
- If your total income exceeds the basic exemption limit, you must get a tax audit under Section 44AB(e) — regardless of turnover
That last point catches people out badly. A trader with ₹40 lakh turnover and a loss would normally have no audit obligation at all. Opt into 44AD one year, opt out the next, and an audit requirement appears out of nowhere.
Practical rule: only opt into 44AD if you expect to stay in it. Treat it as a five-year commitment, not a year-by-year choice.
ITR-4 or ITR-3 if you trade F&O?
Futures and options income is non-speculative business income. That means it can technically be declared under Section 44AD if your turnover is within the limit and the other conditions are met — but for most traders it is the wrong choice.
| Situation | Better form | Why |
|---|---|---|
| F&O loss for the year | ITR-3 | 44AD does not permit a loss to be declared or carried forward. Filing ITR-3 preserves the 8-year carry-forward. |
| Thin margins, heavy costs | ITR-3 | Brokerage, STT, data subscriptions, internet and depreciation can all be claimed. Under 44AD they cannot. |
| Profit comfortably above 6% of turnover | ITR-4 possible | Minimal compliance — but remember the five-year lock-in above. |
| Turnover above ₹2 crore / ₹3 crore | ITR-3 | Outside the 44AD limit entirely. |
| Intraday equity (speculative) income | ITR-3 | Speculative business income must be disclosed separately; ITR-4 has no field for it. |
Because F&O turnover is computed as the absolute sum of profits and losses rather than contract value, many traders cross the presumptive limits sooner than they expect. Our step-by-step ITR-3 guide for F&O traders covers the turnover calculation in detail, and the F&O taxation FAQ answers the common follow-ups.
Advance tax under the presumptive scheme
Taxpayers under 44AD and 44ADA get a concession: instead of four quarterly instalments, the entire advance tax liability can be paid in a single instalment by 15 March. Miss that date and interest under Section 234C applies. Tax paid after 31 March becomes self-assessment tax, payable via Challan 280.
Due dates for AY 2026-27
| Category | Due date |
|---|---|
| Salaried / no business income (ITR-1, ITR-2) | 31 July 2026 |
| ITR-3 / ITR-4, no audit | 31 August 2026 |
| Tax audit cases | 31 October 2026 |
| Belated or revised return | 31 December 2026 |
Filing late means a fee of up to ₹5,000 under Section 234F, and — if you ever need it — the loss of your right to carry forward losses.
How to file ITR-4 online
- Log in at incometax.gov.in with your PAN and go to e-File → Income Tax Returns → File Income Tax Return
- Select AY 2026-27, Online mode, and choose ITR-4
- Confirm your personal details and choose your regime. The new regime is the default; to use the old regime with business income you must file Form 10-IEA before the due date
- Enter your presumptive income under the relevant section — 44AD, 44ADA or 44AE
- Fill the four summary balances: sundry debtors, sundry creditors, stock-in-trade and cash balance
- Add salary, house property and other-sources income, and claim your deductions
- Reconcile against Form 26AS and AIS before submitting — mismatches are the most common trigger for a notice
- Pay any balance tax, submit, and e-verify within 30 days
Frequently asked questions
Is ITR-4 the same as the old ITR-4S?
Effectively yes. ITR-4S (Sugam) was renamed ITR-4 (Sugam) from AY 2017-18. The old ITR-4 became ITR-3. If you are searching for "ITR-4S", the form you want today is ITR-4.
Can I claim business expenses under ITR-4?
No. The deemed percentage is treated as your profit after every expense, including depreciation. If you have substantial genuine costs, regular filing under ITR-3 will usually give a lower tax liability.
I have salary plus a small side business. Can I use ITR-4?
Yes, provided total income stays within ₹50 lakh and the business income is declared presumptively. Salary goes in the salary schedule as usual.
Can I switch between ITR-4 and ITR-3 each year?
Legally you can file a different form, but declaring below the deemed rate after opting into 44AD triggers the five-year lock-in and the audit consequence described above. Switching is rarely as free as it looks.
What if my turnover crosses ₹3 crore mid-year?
You fall outside Section 44AD for that year, must maintain books, and file ITR-3. Tax audit then depends on the Section 44AB thresholds.
Does ITR-4 allow capital gains?
Only long-term capital gains under Section 112A up to ₹1.25 lakh, and only where there is no capital loss to set off or carry forward. Anything else means ITR-2 or ITR-3.
Not sure which form applies to you?
Choosing between presumptive and regular filing is a calculation, not a preference — and the five-year lock-in makes it a decision worth getting right the first time. Our Chartered Accountants will run both computations on your actual figures and file whichever leaves you better off. Send us your details →
Related guides
- How to file ITR-3 for F&O trading
- ITR-1 (Sahaj) — eligibility and how to file
- Who should use ITR-2
- Income tax slabs FY 2025-26
- ITR filing for freelancers and consultants
Disclaimer: This guide reflects the law for FY 2025-26 (AY 2026-27) as understood in August 2026. Tax law changes frequently — please consult a qualified Chartered Accountant before acting on your specific facts.