ITR-4 SUGAM Filing Guide AY 2026–27: Eligibility, Sections 44AD, 44ADA & 44AE

What is ITR-4 SUGAM?

ITR-4 – popularly known as SUGAM — is the simplified income tax return form notified by the Income Tax Department for Assessment Year 2026–27 (Financial Year 2025–26). It is designed for small taxpayers who opt for the presumptive taxation scheme, which eliminates the need to maintain detailed books of accounts.

The form applies to Individuals, Hindu Undivided Families (HUFs), and Firms (other than LLPs) that are residents of India, provided they meet specific income and turnover thresholds.

Key threshold: Total income must not exceed ₹50 lakh, and business income must be computed under Sections 44AD, 44ADA, or 44AE. Long-term capital gains (LTCG) under Section 112A are now permitted up to ₹1.25 lakh.

Who Can File ITR-4?

You are eligible to file ITR-4 for AY 2026–27 if you satisfy all of the following conditions:

• You are a Resident Individual, HUF, or Firm (other than LLP)
• Your total income does not exceed ₹50 lakh for FY 2025–26
• You have business or profession income computed under Sections 44AD, 44ADA, or 44AE
• Your LTCG under Section 112A does not exceed ₹1.25 lakh
• You have income from salary, one or two house properties, and/or other sources in addition to business income

Who Cannot File ITR-4?

Even if you otherwise qualify, you must not use ITR-4 if any of the following applies:

• You are a Director in a company at any point during FY 2025–26
• You hold investments in unlisted equity shares
• Your income-tax on ESOPs has been deferred (Section 191)
• Your agricultural income exceeds ₹5,000
• You have assets (including financial interests in any entity) located outside India
• You wish to carry forward losses from house property or capital gains — use ITR-3 or ITR-5 instead
• Your total income or turnover exceeds the prescribed presumptive scheme limits, triggering a tax audit under Section 44AB

Presumptive Taxation: Sections 44AD, 44ADA and 44AE

The heart of ITR-4 lies in the presumptive taxation schemes that allow small businesses and professionals to declare income at prescribed rates without maintaining detailed books of accounts.

Section 44AD — Small Businesses

Section 44AD of the Income Tax Act provides a presumptive taxation scheme for eligible resident individuals, HUFs, and partnership firms (excluding LLPs) engaged in eligible businesses with turnover up to Rs. 2 crore, which can extend to Rs. 3 crore if cash receipts do not exceed 5% of total receipts. Under this scheme, income is presumed to be 8% of total turnover or gross receipts, or 6% in respect of receipts through banking or digital modes. Taxpayers opting for this scheme are not required to maintain detailed books of accounts, and deductions under Sections 30 to 38, including depreciation, are deemed to have already been allowed. However, if a taxpayer opts out of the scheme after declaring income under Section 44AD, they cannot re-enter the scheme for the next five assessment years and may also be required to maintain books and get accounts audited if income exceeds the basic exemption limit. The scheme is not applicable to professionals, commission or brokerage income earners, agency businesses, or businesses covered under Section 44AE.

Section 44ADA — Specified Professionals

Section 44ADA of the Income Tax Act provides a presumptive taxation scheme for resident individuals and partnership firms (excluding LLPs) engaged in specified professions referred to under Section 44AA, such as legal, medical, engineering, architectural, accountancy, technical consultancy, and other notified professions. Under this scheme, if the gross receipts of the profession do not exceed Rs. 50 lakh in a financial year, or Rs. 75 lakh where cash receipts do not exceed 5% of total receipts, 50% of the gross receipts are deemed to be taxable profits. The assessee may also declare higher profits voluntarily. Separate deductions for expenses under Sections 30 to 38 are not allowed, as they are deemed to have already been considered, including depreciation. However, if the assessee declares income lower than 50% of gross receipts and total income exceeds the basic exemption limit, they are required to maintain books of accounts and get them audited under Section 44AB.

Section 44AE — Goods Carriage Operators

Section 44AE of the Income Tax Act provides a presumptive taxation scheme for taxpayers engaged in the business of plying, hiring, or leasing goods carriages, provided they own not more than 10 goods vehicles at any time during the financial year. Under this scheme, income is calculated on a presumptive basis for each vehicle owned. For heavy goods vehicles, income is deemed to be Rs. 1,000 per ton of gross vehicle weight or unladen weight per month or part thereof, or the actual income earned, whichever is higher. For other goods vehicles, income is deemed to be Rs. 7,500 per month per vehicle or the actual income earned, whichever is higher. Separate deductions for expenses under Sections 30 to 38 are not allowed, as they are deemed to have already been considered, though partnership firms can separately claim deduction for partner’s salary and interest subject to Section 40(b). Taxpayers opting for this scheme are generally exempt from maintaining books of accounts and tax audit requirements under Sections 44AA and 44AB. However, if lower income is claimed than the presumptive income, proper books of accounts and tax audit are required. The section also treats vehicles acquired under hire purchase or instalment arrangements as owned vehicles for the purpose of this scheme.

Old Regime vs New Regime for AY 2026–27

Under Section 115BAC, the new tax regime is the default for AY 2026–27. ITR-4 filers must carefully choose their regime before filing. The process involves Form 10IEA.

Default regime = New Tax Regime. To opt for the old regime, you must file Form 10IEA on or before the due date under Section 139(1). The choice is governed by Section 115BAC(6). Do not miss this deadline — a belated return cannot switch to the old regime.

New Tax Regime (Default)

• Lower slab rates
• Standard deduction of ₹75,000 for salaried individuals
• No HRA, LTA, 80C, 80D, or other Chapter VI-A deductions
• No Form 10IEA required
• Rebate under Section 87A up to ₹60,000
• Nil tax liability up to ₹12 lakh of income

Old Tax Regime (Opt-in)

• Higher slab rates
• All Chapter VI-A deductions available
• HRA, LTA, 80C, 80D, 80E and other deductions applicable
• Form 10IEA must be filed on or before the due date
• Rebate under Section 87A up to ₹12,500
• Beneficial where high deductions are claimed

Tip: Use the Income Tax Department’s tax calculator at incometax.gov.in to compare both regimes before filing.

Key Deductions Available in ITR-4 (Old Regime)

Part C of ITR-4 covers Chapter VI-A deductions. The following are the most commonly claimed deductions under the old tax regime:

Under the new regime, none of the above deductions are available except Section 80CCD(2) and Section 80CCH. The standard deduction of ₹75,000 on salary income is, however, allowed under the new regime.

Important Schedules in ITR-4

Schedule HP — House Property Income

Schedule HP is used to report income or loss from up to two house properties. Tenant PAN and loan details under Section 24(b) must be included wherever applicable. The maximum set-off of house property loss that can be claimed in the current year is capped at ₹2 lakh. If you wish to carry forward the balance loss, you must switch to ITR-2 or ITR-3.

Schedule BP — Business and Profession Income

Schedule BP is the core schedule for computing presumptive income under Sections 44AD, 44ADA, and 44AE. It requires details of turnover or gross receipts (split between digital and cash), the nature and code of each business or profession, GSTIN details, and the basic financial particulars of the business as on 31 March 2026.

Schedule TDS1 and TDS2

Schedule TDS1 is mandatory if you are reporting salary income. Schedule TDS2 covers TDS on income other than salary. Both must be filled accurately, and the figures must match Form 26AS and the Annual Information Statement (AIS) available on the income tax portal.

Schedules 80D, 80G, and 80GGC

These deduction schedules must be filled independently. The corresponding fields in Part C of the form — C6 for 80D, C13 for 80G, and C15 for 80GGC — are auto-populated from the data entered in these schedules. Do not try to directly enter values in Part C without first completing the underlying schedules.

Financial Particulars (E11 to E25)

Taxpayers under Section 44AD, 44ADA, or 44AE must report basic balance sheet information as on 31 March 2026. The following five fields are mandatory regardless of whether other fields are filled: E15 (Sundry creditors), E19 (Inventories), E20 (Sundry debtors), E21 (Balance with banks), and E22 (Cash in hand). Other fields such as E11 to E14, E16, E18, and E23 to E24 should be filled wherever data is available.

GST Information (E9 to E10)

If you are a GST-registered taxpayer, you must report the annual value of outward supplies as per the GST returns filed for each GSTIN separately in Schedule E9. The total of all GSTINs flows to E10. The Income Tax Department uses this information to cross-verify declared turnover against GSTN data. Accurate reporting here significantly reduces the chances of receiving a scrutiny notice.

Due Dates and Penalties for AY 2026–27

• 31 July 2026 — Due date for filing ITR-4 for non-audit cases under Section 139(1)
• 31 July 2026 — Last date to file Form 10IEA to opt for the old tax regime
• 31 December 2026 — Deadline for filing a belated return under Section 139(4)

Penalties to watch:

Section 234F — A late filing fee of ₹5,000 applies if the return is filed after 31 July 2026. This is reduced to ₹1,000 if total income does not exceed ₹5 lakh.

Section 234A — Interest at 1% per month on tax payable is charged for every month of delay in filing the return after the due date.

Section 234B and 234C — Interest is levied for default or shortfall in payment of advance tax during the year.

Section 234-I — A fee applies for filing a revised return of income.

Seventh Proviso to Section 139(1) — Mandatory Filing Even Without Tax Liability

You must file ITR-4 even if your total income is below the basic exemption limit if any of the following conditions are met during FY 2025–26:

• Cash deposits in one or more current accounts exceed ₹1 crore during the year
• Foreign travel expenditure for yourself or any other person exceeds ₹2 lakh
• Electricity consumption expenditure exceeds ₹1 lakh during the year
• Business turnover or gross receipts exceed ₹60 lakh during the year
• Professional gross receipts exceed ₹10 lakh during the year
• Aggregate TDS and TCS during the year is ₹25,000 or more (₹50,000 for resident senior citizens)

Important Notes:

1. If you have not opted for the Old Tax Regime, only deductions under Section 80CCD(2) (Employer’s contribution to Tier-1 NPS Account) and Section 80CCH (amount deposited in the Agniveer Corpus Fund) will be allowed.
2. If a taxpayer opts for the Old Tax Regime and claims deduction under Section 80DD or Section 80U for autism, cerebral palsy, or multiple disabilities, it is mandatory to file Form 10-IA before filing the income tax return.
3. If a taxpayer opts for the Old Tax Regime and claims deduction under Section 80GG, filing of Form 10BA before filing the return is mandatory.
4. PRAN is mandatory for claiming deduction under Sections 80CCD(1) and 80CCD(1B).
5. The Finance (No. 2) Act, 2024 introduced Section 115BAC(1A), under which the New Tax Regime has become the default tax regime for Individuals, HUFs, AOPs (other than co-operative societies), BOIs, and artificial juridical persons. Taxpayers wishing to opt for the Old Tax Regime must specifically choose it while filing the return.
6. Taxpayers having income from business or profession who wish to opt out of the New Tax Regime and choose the Old Tax Regime are required to file Form 10-IEA on or before the due date under Section 139(1).
7. If the return is verified through ITR-V, a signed physical copy of the ITR-V must be sent to CPC Bengaluru – 560500 within 30 days from the date of uploading the return.
8. Taxpayers should ensure that their bank account is pre-validated to receive any income tax refund directly into the bank account.
9. As per Notification No. 2/2024 dated 31.03.2024:
   • If the ITR is uploaded and verified within 30 days, the date of uploading will be treated as the date of filing the return.
   • If verification is completed after 30 days, the date of e-verification or submission of ITR-V will be treated as the filing date, and consequences of late filing may apply.
   • If the return is not verified within the prescribed time limit, the return will be treated as invalid.
10. The duly signed ITR-V should be sent only to:

Centralised Processing Centre
Income Tax Department
Bengaluru – 560500, Karnataka.

Frequently Asked Questions

Can a freelance consultant file ITR-4?

Yes, provided the profession falls under a notified category under Section 44ADA and gross receipts do not exceed ₹50 lakh (extendable to ₹75 lakh if more than 95% of receipts are received through digital modes). The presumptive income to be declared is 50% of gross receipts or the actual amount earned, whichever is higher.

What if I declared income below the presumptive rate in a previous year?

If income declared was below the prescribed percentage under Section 44AD and your total income exceeds the basic exemption limit, Section 44AD(4) applies. You will be required to maintain books of account and obtain a tax audit under Section 44AB. ITR-3 must be filed in such cases, not ITR-4.

Can I claim House Rent Allowance (HRA) in ITR-4?

Only if you also have salary income and are filing under the old tax regime. The HRA exemption under Section 10(13A) is entered in the salary section of the form under the field for allowances exempt under Section 10.

My house property loss is ₹3 lakh. Can I still use ITR-4?

You can file ITR-4, but only ₹2 lakh of the house property loss can be set off against other income in the current year. The remaining ₹1 lakh cannot be carried forward in ITR-4. To carry forward the balance loss, you would need to file ITR-2 or ITR-3 instead.

Is Aadhaar–PAN linkage mandatory for ITR-4?

Yes. You must enter the Aadhaar number that is linked to your PAN on the e-Filing portal. This is a mandatory field for all individual taxpayers. Ensure that your Aadhaar–PAN linkage is active and updated before you begin the filing process.