What is ITR-4? The Tax Form That Could Save You Money!

Truth be told, understanding India’s income tax forms is a mentally draining chore. For business owners, freelancers, and busy professionals, the headache only multiplies when faced with choosing the right form. One form, in particular, that often raises eyebrows (and sometimes even blood pressure) is ITR-4, short for Income Tax Return 4.

If you have ever found yourself Googling “What is ITR-4?”, “Who can file ITR-4?”, or “ITR-4 is for whom?”, you are not alone! Well, if that’s any comfort, you have landed in the right place. This guide will help you understand who should file ITR-4, how it works, and how it can actually benefit your business without using overwhelming jargon.

So, stay with us, because tax season, opposed to popular belief, doesn’t have to be taxing!

Form ITR-4 Meaning: What is ITR-4 in Income Tax?

ITR-4 form, or Sugam, is a type of income tax return form that serves individual taxpayers running small businesses or practicing any profession covered under presumptive taxation in Section 44AD, 44ADA, and 44AE of the Income Tax Act, 1961. That is also why it is sometimes called the presumptive income ITR form.

It is a simplified return form where income is reported not on actual profit but on a presumed fixed percentage of turnover or gross receipts. This method spares taxpayers the trouble of maintaining sundry books of account or conducting elaborate audits.

In essence, ITR-4 means to act as an easy option for certain taxpayers to remain compliant while enjoying benefits like reduced record-keeping and faster filing.

Presumptive Taxation & Sections Covered in ITR-4

The crux of using the income tax return form ITR-4 lies in the presumptive taxation scheme. This scheme allows you to declare income at a fixed rate without detailed profit-loss accounting, as long as you meet turnover and business type criteria defined by…

• Section 44AD: For small businesses with turnover up to INR 2 crores (INR 3 crores if digital payments exceed 95%). Here, presumptive income is 8% of turnover or 6% if nearly all receipts are digital.
• Section 44ADA: Section 44ADA applies to designated professionals like lawyers, doctors, engineers, accountants, technical consultants, architects, etc., with gross receipts up to INR 50 lakhs (INR 75 lakhs if digital receipts exceed 95%). It assumes that income is half of gross receipts.
• Section 44AE: For businesses involving leasing or hiring goods carriages. Income is calculated based on the type and weight of the vehicle, with fixed presumptive amounts per vehicle per month.

This is the key reason why many taxpayers question ITR-4 applicability. If your business or profession fits into the categories mentioned above, this presumptive income ITR form is the right form for you.

ITR-4 Applicability: Who Should File ITR-4?

Answering ITR-4 is for whom is critical for compliance and avoiding penalties. ITR-4 should be filed by…

• Resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) with income from business or profession on a presumptive basis
• Small businesses with turnover up to INR 2 crores (INR 3 crores if digital transactions meet criteria) under Section 44AD
• Professionals like doctors, lawyers, engineers, or freelancers with gross receipts below INR 50 lakhs (INR 75 lakhs with digital payments) under Section 44ADA
• Business owners in leasing or hiring goods carriages (Section 44AE)
• Taxpayers whose total income does not exceed INR 50 lakhs
• Individuals with salary income and/or income from one house property, alongside presumptive income

However, people not eligible to file ITR-4 include…

• Non-resident taxpayers
• Those with income from capital gains beyond INR 1.25 lakh under Section 112A
• Taxpayers with income from more than one house property
• Directors in companies or those holding unlisted shares
• Businesses requiring audit or bookkeeping under Section 44AA
• Businesses with turnover exceeding the prescribed limits
• Taxpayers with a total income exceeding INR 50 lakh
• Those with agricultural income over INR 5,000
• Taxpayers with foreign income or assets
• Partners in a firm
• Taxpayers with income from lottery or race horses
• Taxpayers with income taxable under Sections 115BBDA or 115BBE
• Taxpayers with deferred ESOP tax from eligible startups
• Taxpayers earning commission or brokerage income
• Agency businesses
• Professionals not opting for presumptive taxation
• Professionals with receipts over INR 50 lakh (or INR 75 lakh if cashless)
• Businesses with turnover over INR 2 crore (or INR 3 crore if cashless)

ITR-4 Filing Last Date for AY 2025-26

Originally, the ITR-4 filing last date was July 31, 2025. But owing to some major changes in income tax return formats and system updates, the Central Board of Direct Taxes (CBDT) extended it for most taxpayers, including those filing ITR-4, to September 15, 2025.

If you happen to miss the ITR-4 filing last date, you will be liable to pay a late fee (up to INR 5,000) under Section 234F, and interest under Section 234A if any tax is unpaid.

But don’t let that be a cause of concern, for you will still be able to file a belated return by Dec 31, 2025. It will, however, come with its own set of penalties and interest. You might also lose out on tax benefits like carrying forward business losses or claiming certain deductions.

Everything You Should Know About Capital Gains in ITR-4

Capital gains happen when you sell something valuable, like shares, mutual funds, or property, for more than what you paid for it. When it comes to capital gains in ITR-4, there are strict limits on what you can report.

Only long-term capital gains (LTCG) from listed shares or equity mutual funds under Section 112A, and only up to INR 1.25 lakh, are allowed in ITR-4.

The following gains are not allowed in ITR-4…

• Short-term capital gains (STCG) from shares
• Capital gains from property sales
• Large or multiple capital gains
• Foreign assets or income

If you happen to have any of these, you should not use ITR-4. Instead…

• Use ITR-2 if you have capital gains but no business income
• Use ITR-3 if you have both capital gains and business/professional income

Understanding ITR-4 Form Structure & Key Sections

As of AY 2025-26, the ITR-4 form includes the following crucial sections…

Part A: General Information

This includes basic taxpayer details such as PAN, name, address, filing status, and contact info. Some personal details are auto filled via the Income Tax portal and may require verification or editing on your profile before filing.

Part B: Gross Total Income

Here, you report income from various sources including…

• Income from salary or pension
• Income from one house property (with relevant details)
• Business or professional income computed on a presumptive basis as per Sections 44AD, 44ADA, or 44AE
• Income from other sources like interest income

Part C: Deductions and Net Taxable Income

This section captures tax deductions under Chapter VI-A such as…

• Section 80C investments (PPF, ELSS, LIC premiums)
• Section 80D (health insurance)
• Donations under Section 80G, and other eligible deductions

Part D: Tax Computation & Payment

The form calculates your total tax liability based on income and deductions, advancing to tax payments already made via TDS, self-assessment tax, or advance tax.

Schedule BP (Business & Profession Income)

• This is vital for ITR-4 income tax filing. You must provide…
• Nature of business or profession using codes provided
• Turnover/gross receipts details, segregated by payment mode (cash, cheque, digital)
• Presumptive income calculations as per the applicable section
• Details about the business assets and liabilities like fixed assets, loans, sundry debtors, creditors, cash in hand, inventories, etc.

TDS and TCS Schedules

Statements of tax deducted at source on income beyond salary and tax collected at source are disclosed here.

GST Details (Optional)

Goods and Services Tax Identification Number (GSTIN) and turnover reported under GST returns can be furnished to align financial records.

Verification

A mandatory declaration that information provided is true and accurate, with the taxpayer’s signature or electronic verification upon submitting.

Major Changes in ITR-4 for AY 2025-26

As taxpayers gear up to file their returns for FY 2024-25, it is important to know the latest updates on the income tax return form ITR-4. Some of them are listed below for your convenience…

• Reporting of Long-Term Capital Gains (LTCG) in ITR-4

One of the most important updates is that taxpayers can now report long-term capital gains (LTCG) under Section 112A directly in ITR-4 for gains up to INR 1.25 lakh, provided there are no capital losses to carry forward.

Earlier, such LTCG income forced taxpayers to use other ITR forms, but now this change widens the ITR-4 applicability to investors with small gains. This update positions ITR-4 income tax filing as an even more user-friendly option for many.

• Increased Turnover Limits for Digital Transactions

The turnover limit under Section 44AD for presumptive taxation has increased from INR 2 crore to INR 3 crore, if 95% or more receipts are being made digitally.

Similarly, for professionals under Section 44ADA, the limit has risen from INR 50 lakh to INR 75 lakh under the same digital transaction condition. This gives the number of people who can file ITR-4 a major boost, as more small businesses and freelancers come under its ambit.

• Mandatory Disclosure of Tax Regime Choice

Taxpayers filing income tax return form 4 must now explicitly choose and declare whether they are opting for the old tax regime or the new tax regime under Section 115BAC. For first-time opt-outs from the new regime, providing Form 10-IEA acknowledgment is compulsory.

• Detailed Deduction Reporting

The updated ITR-4 form lets taxpayers choose deductions under Sections 80C to 80U from set options, making claims more accurate and boosting transparency in tax-saving details.

• Reporting of Active Bank Accounts

Taxpayers filing ITR-4 now have to report details of all active bank accounts during the financial year, excluding dormant accounts inactive for more than two years. This requirement strengthens financial traceability for the Income Tax Department.

• Aadhaar Number Mandatory

The ITR-4 form has removed the option to provide Aadhaar Enrolment IDs. It now requires the actual Aadhaar number for filing.

• Extended Filing Deadline

The due date for filing income tax return 4 for AY 2025-26 has been extended to September 15, 2025. This has given taxpayers more time to comply with new requirements without penalties.

These aforementioned changes collectively make ITR-4 form easier to file, especially for taxpayers who have small capital gains and those embracing digital payments. If you keep yourself abreast of these updates, you will miss out on filing of your ITR-4 income tax return.

Benefits of Filing ITR-4

Choosing the income tax return form 4 brings multiple advantages to eligible taxpayers…

• Simplified compliance: You aren’t required to conduct detailed bookkeeping or an audit unless turnover exceeds thresholds.
• Predictable tax calculations: When income is presumed at fixed percentages, tax planning becomes simple.
• Flexibility: ITR-4 is suitable for a variety of small businesses and professional services.
• Time & cost saving: Those filing are no longer required to waste time in accounting and preparation.
• Eligibility for deductions: You would still be able to claim tax-saving investments and donations.
• Government support: With digital filing options and pre-filled data, the possibility of errors reduces manifold.

Limitations & Important Considerations of ITR-4

Despite benefits, there are limitations to keep in mind…

• No claim allowed for actual business expenses or depreciation.
• Advance tax payments due dates vary; some taxpayers must pay 100% advance tax by March 15.
• Form is unsuitable for taxpayers with income beyond presumptive scheme limits or complex income sources.
• Filing inaccurate information or opting improperly may lead to income tax notices or reassessment.

Differentiating ITR-4 from ITR-1 and ITR-3

Many taxpayers stumble over which return form to choose. Here’s a clear-cut comparison focusing on ITR-1 and ITR-4 & ITR-3 and ITR-4 respectively…

Conclusion

So, once again, what is ITR-4 in income tax? It is a form of great significance for taxpayers with small business or professional incomes to comply with income tax laws efficiently. Understanding it and knowing if it is applicable to you would not only save you time, but also money and unnecessary stress.

If you are looking for an income tax software to simplify your ITR-4 filing process, get in touch with the Techjockey product team today itself and drop the hunt.