Overview
Income Tax E-Filing of ITR-4 (Sugam) is designed for small businesses and professionals who choose to pay tax under the presumptive taxation scheme instead of maintaining detailed books of accounts.
The objective of ITR-4 is to simplify compliance by allowing income to be declared at a fixed percentage of turnover or receipts, provided eligibility conditions are strictly met.
You should opt for ITR-4 if you
- Run a small business under Section 44AD
- Are a professional opting for Section 44ADA
- Operate goods carriages under Section 44AE
- Also earn income from salary, one house property, or interest
ITR-4 is filed electronically through the portal of the Income Tax Department and is meant only for non-audit, low-complexity cases.
Eligibility Criteria for ITR-4 (AY 2026-27)
You can file ITR-4 only if all conditions below are satisfied
- You are an Individual, HUF, or Firm (not LLP)
- Total income does not exceed ₹50 lakh
- You have opted for presumptive taxation
- You have no foreign income or foreign assets
- You are not a company director
- You do not hold unlisted equity shares
Enhanced Presumptive Limits (Digital-Friendly Rules)
Eligibility depends on cash receipt percentage
- Section 44AD (Business): Turnover up to ₹3 crore if cash receipts ≤ 5% (₹2 crore otherwise)
- Section 44ADA (Profession): Gross receipts up to ₹75 lakh if cash receipts ≤ 5% (₹50 lakh otherwise)
Many digital professionals now legitimately qualify for ITR-4 up to ₹75 lakh.
Income Covered Under ITR-4
ITR-4 allows reporting of
- Presumptive business income (Section 44AD)
- Presumptive professional income (Section 44ADA)
- Income from goods carriages (Section 44AE)
- Salary or pension income
- Income from one house property
- Interest and other income
Capital Gains – Important Limitation
As a general rule, capital gains are not permitted in ITR-4.
Limited technical exception
- LTCG under Section 112A
- Not exceeding ₹1.25 lakh
- No short-term capital gains
Even where technically eligible, ITR-2 is safer if any capital gains exist. If there is even ₹1 of short-term capital gain, ITR-4 becomes invalid.
Presumptive Taxation – How Income Is Declared
- Section 44AD (Business): 8% of turnover (6% for digital receipts)
- Section 44ADA (Profession): 50% of gross receipts
Once presumptive taxation is chosen
- Expenses are deemed allowed
- Actual expense claims are not permitted
- Books of accounts are generally not required
Section 87A Rebate & Marginal Relief (ITR-4)
Rebate under the New Regime
- If taxable income ≤ ₹12 lakh, → tax is fully rebated → final tax payable = Nil
₹12 lakh is not a zero-tax slab. Tax is calculated first, then rebated.
Marginal Relief – Safety Net for Small Businesses
If income slightly exceeds ₹12 lakh
- Tax payable is capped at the excess income
- Prevents sudden loss of rebate benefit
This is especially useful for businesses with fluctuating profits.
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