ITR-4 (Sugam) Filing Guide 2026 — Presumptive Taxation for Small Business and Freelancers

ITR-4 (Sugam) is the income tax return form for small businesses and professionals who opt for presumptive taxation. It is simpler than ITR-3 — no detailed profit and loss account or balance sheet required. Here is the complete guide for FY 2025-26.

Who Should File ITR-4?

File ITR-4 if you are a resident individual, HUF, or partnership firm (not LLP) and you opt for presumptive taxation under:

• Section 44AD — Small businesses with turnover up to ₹2 crore, or ₹3 crore if cash receipts stay within 5%
• Section 44ADA — Professionals with gross receipts up to ₹50 lakh, or ₹75 lakh if cash receipts stay within 5%
• Section 44AE — Goods carriage owners with up to 10 vehicles

You cannot file ITR-4 if:

• You are a company or LLP
• You have capital gains, other than an aggregate long-term equity gain within ₹1,25,000 under Section 112A, which ITR-4 accepts from AY 2026-27. Any short-term gain rules the form out however small it is
• You have income from more than one house property. For AY 2026-27 the simplified forms were expanded to accept two, but that change is clearly documented for ITR-1 while the department's own ITR-4 help page still refers to a single house property — confirm your position before filing ITR-4 with two.
• You are a director in a company
• You have foreign assets or foreign income
• You have income from speculative business

Section 44AD — Small Business Presumptive Taxation

Who Can Use Section 44AD?

Any resident individual, HUF, or partnership firm engaged in any business (except professions covered under Section 44ADA) with turnover up to:

• ₹3 crore if 95%+ receipts are through banking channels
• ₹2 crore if more than 5% receipts are in cash

How Much Income to Declare?

Declare 8% of turnover as profit (or 6% for digital transactions).

Example:

• Turnover: ₹80,00,000
• Digital receipts: 100%
• Presumed profit (6%): ₹4,80,000
• Tax under new regime: approximately ₹0 (below ₹12L after standard deduction)

You can declare more than 6%/8% if your actual profit is higher.

What You Cannot Do Under Section 44AD

• Claim depreciation on assets
• Claim actual business expenses
• Carry forward business losses (if you declare less than 6%/8%)

5-Year Lock-In

If you opt for Section 44AD, you must continue for 5 consecutive years. If you switch to actual books before 5 years, you cannot opt for Section 44AD again for the next 5 years.

Section 44ADA — Professional Presumptive Taxation

Who Can Use Section 44ADA?

Resident individuals and partnership firms in specified professions:

• Legal (lawyers, advocates)
• Medical (doctors, dentists)
• Engineering
• Architecture
• Accountancy (CAs, CMAs)
• Technical consultancy
• Interior decoration
• Film artists
• Information technology (IT freelancers, software developers)

Gross receipts limit: ₹50 lakh, extending to ₹75 lakh only where cash receipts do not exceed 5% of gross receipts (so 95%+ through banking channels). A cheque or draft that is not account-payee counts as cash.

How Much Income to Declare?

Declare 50% of gross receipts as profit.

Example:

• Gross receipts: ₹50,00,000
• Presumed profit (50%): ₹25,00,000
• Standard deduction: ₹75,000
• Taxable income: ₹24,25,000
• Tax under new regime: approximately ₹3,56,250

Section 44AE — Goods Carriage Owners

For owners of goods carriages (trucks, lorries) with up to 10 vehicles:

• Declare ₹1,000 per ton per month for heavy goods vehicles
• Declare ₹7,500 per month for other vehicles

Advance Tax Under ITR-4

Section 44AD and 44ADA

Pay 100% of advance tax by March 15 of the financial year. Quarterly instalments do not apply.

Section 44AE

Normal advance tax rules apply (quarterly instalments).

How to Fill ITR-4

Part A: General Information

• PAN, name, address, date of birth
• Filing status (original/revised/belated)
• Assessment year: 2026-27

Part B: Gross Total Income

• Salary income (if any)
• House property income (one property only)
• Business income under Section 44AD/44ADA/44AE
• Other sources income

Schedule BP: Business/Profession Income

This is the key schedule for ITR-4:

For Section 44AD:

• Gross turnover
• Presumed profit (6% or 8%)
• Any additional income declared

For Section 44ADA:

• Gross receipts
• Presumed profit (50%)

Schedule DPM: Depreciation

Not required under presumptive taxation. Leave blank.

Schedule P&L: Profit and Loss

Not required under presumptive taxation. Leave blank.

Schedule BS: Balance Sheet

Not required under presumptive taxation. Leave blank.

ITR-4 vs ITR-3 — Which to File?

Deadline for ITR-4

August 31, 2026 for FY 2025-26 (extended by Budget 2026 from July 31).

This extension applies to all ITR-3 and ITR-4 filers (freelancers and business income).

Common Mistakes in ITR-4

1. Declaring less than 6%/8% without maintaining books — If you declare less than the presumed rate, you must maintain books and get a tax audit
2. Including capital gains — ITR-4 cannot be used if you have capital gains; use ITR-3
3. Wrong turnover figure — Include all receipts, including TDS deducted by clients
4. Not paying advance tax by March 15 — Interest under Section 234B applies

Frequently Asked Questions

Can a salaried person with a side business file ITR-4?

Yes. If you have salary income plus business income under Section 44AD or 44ADA, you can file ITR-4 — provided you do not have capital gains or other ITR-4 disqualifiers.

What if my turnover exceeds the Section 44AD limit?

If your turnover exceeds ₹3 crore (or ₹2 crore for cash-heavy businesses), you cannot use Section 44AD. You must maintain books and file ITR-3.

Can I switch from ITR-4 to ITR-3 every year?

No. The 5-year lock-in rule under Section 44AD prevents switching back and forth. Once you opt for Section 44AD, you must continue for 5 years.

Is GST registration required for ITR-4 filers?

GST registration depends on your turnover, not your ITR form. If your turnover exceeds the GST threshold (₹40L for goods, ₹20L for services), you must register for GST regardless of which ITR form you file.

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