Synopsis

For the assessment year 2026-2027, new changes have been introduced impacting those filing ITR-4. Taxpayers need to be aware of six major updates to the form, which encompass revised investment disclosures and updated requirements for reporting house properties. Additionally, claims for political party deductions require specific information now, while the previous reporting relief under Section 89A has been eliminated, with a secondary address now optional.

If you are working as a consultant, earning freelance income, have a business or professional income, chances are you’ll need to file an income tax return (ITR) using either ITR-3 or ITR-4, depending on various factors, on or before August 31, 2026, for the Assessment Year 2026-2027.



You can file ITR-3 or ITR-4 on your own for free through the e-filing ITR portal or you can hire a chartered accountant for a fee. Either way, you need to know what changes were made in ITR-3 and ITR-4 for AY 2026-2027 so you can prepare accordingly.

So, what exactly is ITR-4 and who needs to file it?

ITR-4 (Sugam) is a simplified income tax return form generally available to resident individuals, HUFs and firms (other than LLPs) who meet the prescribed eligibility conditions and opt for the presumptive taxation scheme under Sections 44AD, 44ADA or 44AE.

• Income not exceeding Rs 50 Lakh during the financial year
• Income from Business and Profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE
• Long-term capital gain u/s 112A not exceeding Rs.1.25 lakhs
• Income from Salary/Pension, one House Property, Agricultural Income (up to ₹ 5000/-)
• Other Sources which include (excluding winning from Lottery and Income from Race Horses):
• Interest from Savings Account
• Interest from Deposit (Bank / Post Office / Cooperative Society)
• Interest from Income Tax Refund
• Family Pension
• Interest received on enhanced compensation
• Any other Interest Income (e.g., Interest Income from Unsecured Loan)

According to Sections 44AA of the Income Tax Act (1961), a person engaged in business or profession needs to maintain regular books of accounts under certain circumstances as per specific conditions. To relieve small taxpayers from such compliance burden, the Income Tax Act has framed the presumptive taxation scheme u/s 44AD, 44ADA and 44AE. A person adopting the presumptive taxation scheme can declare income at a prescribed rate. ​​The Act has laid out presumptive taxation schemes (for ITR-4 users) as given below: ·

• Section 44AD: Computation of income on estimated basis in the case of taxpayers (being a Resident Individual, Resident HUF, or Resident Partnership Firm (other than LLP) engaged in certain business subject to certain conditions.
• Section 44ADA: Computation of professional income on estimated basis for Assessee being a resident in India and engaged in a profession referred to in section 44AA (1) subject to certain conditions.
• Section 44AE: Computation of income on estimated basis in the case of taxpayers (being an Individual, HUF, Firm (other than LLP) or any other person being a resident or non-resident) engaged in the business of plying, leasing or hiring goods carriages, who owns not more than ten goods carriages at any time during the previous year.

Chartered Accountant Abhishek Soni, co-founder, Tax2Win, says that under presumptive taxation, eligible taxpayers can declare income at a prescribed percentage or amount instead of calculating their actual business or professional profits and maintaining detailed books of account in the manner generally required under the regular taxation provisions.



However, ITR-4 is subject to specific eligibility conditions, including a total income limit of Rs 50 lakh. Taxpayers who do not fulfill these conditions may need to file ITR-3 instead. For Section 44AD, the normal turnover/receipts limit is Rs 2 crore, which can increase to Rs 3 crore where cash receipts do not exceed the prescribed 5% threshold.



Soni shares some key changes and reporting requirements including:

• Investment disclosure: Additional disclosure requirements apply to investments made under the presumptive taxation scheme.
• House property: Income or loss from up to two house properties can be reported, subject to the applicable conditions.
• House-property details: Where applicable, taxpayers need to provide relevant owner, co-owner and tenant details.
• Section 80GGC: Political party name and PAN are required when claiming the applicable deduction.
• Section 89A: The earlier reporting requirement for relief under Section 89A has been removed.
• Secondary address: An option to provide a secondary address has been added.

File Form 10-IEA to opt for old tax regime or to switch back to new tax regime

Individuals having business income are not eligible to choose between the new and old tax regimes every year. Once they have opted for the old tax regime, they only have a one-time option of switching back to the New tax regime in their lifetime. Once they switch back, they cannot opt for the old tax regime again.



Essentially, people with business income may have to fill out Form 10-IEA twice, once to use the Old tax regime and the second to switch back to the New regime.

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