The ITR-4 Sugam AY 2026-27 is the simplest path to filing for freelancers, small business owners, and professionals. This year, it comes with the single most important compliance change of the season: mandatory bank balance disclosure in the new Field E21. CBDT Notification 45/2026 also expanded ITR-4 to accept two house properties, and it keeps the small equity LTCG allowance that began in AY 2025-26, bringing it closer in scope to the rebuilt ITR-1.
If you operate under the presumptive scheme (Section 44AD, 44ADA, or 44AE), this is your form. Here is everything that changed, who qualifies, and how to file without creating an automatic income-vs-balance mismatch flag.
Who Can File ITR-4 Sugam for AY 2026-27
ITR-4 Sugam is for resident individuals, HUFs, and partnership firms (excluding LLPs) who tick every one of these boxes:
- Total income up to ₹50 lakh in FY 2025-26.
- Income from business or profession computed under the presumptive scheme like Section 44AD (small business), Section 44ADA (professionals), or Section 44AE (goods transporters).
- Eligible additional income heads: salary or pension, income from up to two house properties, other sources (interest, dividend, family pension), LTCG under Section 112A up to ₹1.25 lakh, agricultural income up to ₹5,000.
You cannot use ITR-4 if you are:
- A non-resident or RNOR.
- An LLP (file ITR-5 instead).
- A company director or holder of unlisted shares.
- Receiving income from more than two house properties.
- Earning foreign income or holding foreign assets.
- Earning agricultural income above ₹5,000.
- Reporting any capital gains other than Section 112A LTCG up to ₹1.25 lakh (no STCG, no other LTCG).
- Carrying brought-forward business losses to set off in this year.
The Three Major Changes in ITR-4 AY 2026-27
Change 1: Mandatory Bank Balance in Field E21 (The Big One)
This is the change every ITR-4 filer needs to internalize. CBDT Notification 45/2026 added Field E21 (Balance with banks) to the financial particulars section of ITR-4. From AY 2026-27 onwards:
- You must report the aggregate closing balance of all business bank accounts as on March 31, 2026, in a single combined figure.
- This includes savings accounts used for business, current accounts, and overdraft or cash credit accounts showing positive balances.
- Overdraft and cash credit accounts with negative balances are not deducted from E21. They are reported separately under liabilities.
- The figure is mandatory even though presumptive-scheme filers are not required to maintain books of accounts.
A bank balance is a point-in-time asset, while receipts and profit measure activity over a period. Reconcile opening balances, receipts, payments, transfers and funding to the closing figure. A difference does not automatically establish an AIS mismatch or a notice.
Change 2 (since AY 2025-26): LTCG Under Section 112A Up to ₹1.25 Lakh Allowed
Earlier, any capital gain disqualified you from ITR-4. Since AY 2025-26 (CBDT Notification 40/2025), you can include listed equity LTCG up to ₹1.25 lakh (Section 112A) without losing eligibility, and the relief continues for AY 2026-27. Conditions: no STCG, no other LTCG, no carry-forward losses. These are the same rules as the corresponding ITR-1 change.
Change 3: Two House Properties Now Allowed
The second-property limit has been lifted from one to two, same as in the expanded ITR-1. A common scenario this helps: a small shopkeeper with a self-occupied home and a second flat earning ₹15,000 monthly rent can finally stay on ITR-4 instead of being pushed to ITR-3.
Presumptive Scheme Limits and Rates: FY 2025-26 Reference
Section 44AD for Small Businesses
| Parameter | Threshold |
|---|---|
| Eligible entities | Resident individual, HUF, partnership firm (not LLP) |
| Standard turnover limit | ₹2 crore |
| Enhanced turnover limit (cash receipts ≤ 5% of turnover) | ₹3 crore |
| Presumptive profit for non-digital receipts | 8% of turnover |
| Presumptive profit for digital receipts | 6% of turnover |
| Books of accounts under Section 44AA | Not required |
| Audit under Section 44AB | Not required if profit ≥ 8% / 6% |
| Lock-in if opted out | 5 years |
| Advance tax | 100% by March 15 |
Exclusions: agency businesses, businesses earning commission or brokerage, and businesses already covered under Section 44AE (goods transport).
Section 44ADA for Specified Professionals
| Parameter | Threshold |
|---|---|
| Eligible entities | Resident individual, partnership firm (not LLP) |
| Standard gross receipts limit | ₹50 lakh |
| Enhanced limit (cash receipts ≤ 5% of gross receipts) | ₹75 lakh |
| Presumptive profit | 50% of gross receipts |
| Lock-in if opted out | None (annual choice) |
Eligible professions under Section 44AA(1): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, film artists, authorized representatives, and information technology professionals.
Section 44AE for Goods Transporters
For owners of up to 10 goods carriage vehicles. Presumptive income: ₹1,000 per ton of gross vehicle weight per month for heavy goods vehicles (above 12,000 kg), ₹7,500 per month per vehicle for lighter vehicles.
ITR-4 vs ITR-3: The Break-Even Calculation
The presumptive scheme is a tax-versus-effort trade-off. Here is the break-even logic in numbers:
Example 1: Software Consultant, ₹40 Lakh Receipts
| Item | ITR-4 (44ADA presumptive) | ITR-3 (regular books) |
|---|---|---|
| Gross receipts | ₹40,00,000 | ₹40,00,000 |
| Allowable expenses | (not declared) | ₹6,00,000 |
| Presumptive profit (50%) | ₹20,00,000 | Not Applicable |
| Actual net profit | Not Applicable | ₹34,00,000 |
| Taxable income | ₹20,00,000 | ₹34,00,000 |
| Tax (new regime, approx) | ₹2,08,000 | ₹6,24,000 |
For this illustration, assume a resident individual, eligible specified professional activity, only normal-rate income, no further deductions and no surcharge. On taxable income of Rs 20 lakh, new-regime tax is Rs 2,00,000 plus 4% cess = Rs 2,08,000. On Rs 34 lakh it is Rs 6,00,000 plus cess = Rs 6,24,000. The arithmetic difference is Rs 4,16,000; eligibility and the correct income declaration must be established first.
Example 2: Eligible professional practice with high expenses
| Item | ITR-4 (44ADA presumptive) | ITR-3 (regular books) |
|---|---|---|
| Gross receipts | ₹40,00,000 | ₹40,00,000 |
| Allowable expenses | (not declared) | ₹28,00,000 (subcontractors, salaries, office) |
| Presumptive profit (50%) | ₹20,00,000 | Not Applicable |
| Actual net profit | Not Applicable | ₹12,00,000 |
| Taxable income | ₹20,00,000 | ₹12,00,000 |
| Tax (new regime, approx) | ₹2,08,000 | ₹0 |
Assuming the same resident-individual conditions, ordinary taxable income of Rs 12 lakh attracts a rebate of Rs 60,000 and net tax of zero. The difference from the Rs 20 lakh illustration is Rs 2,08,000. A generic digital agency is not automatically a section 44ADA profession; check classification, records and any audit requirement before using this comparison.
The rule of thumb: if your actual net margin is below the presumptive rate, file ITR-3.
Step-by-Step ITR-4 Filing for AY 2026-27
Step 1: Confirm Eligibility
Run through the checklist above. One disqualifier and you must file ITR-3 instead.
Step 2: Compute Presumptive Income
For 44AD: total turnover × 6% (digital) or 8% (non-digital). For 44ADA: gross receipts × 50%. For 44AE: per-vehicle rate × months × number of vehicles.
Step 3: Aggregate All Bank Balances for Field E21
Pull March 31, 2026 closing balance from every business bank account, including savings (used for business), current, and OD/CC (only positive balances). Add them together. Enter the single combined figure in Field E21. Keep documentation of the breakup for your records.
Step 4: Add Other Eligible Income
Salary or pension (if any). Income from up to two house properties. Other sources like interest, dividend, and family pension. LTCG under Section 112A up to ₹1.25 lakh (if eligible).
Step 5: Choose Your Tax Regime
New regime under Section 115BAC is default. Old regime requires explicit opt-out at the start of the form and, for business income, filing of Form 10-IEA before the due date. Miss Form 10-IEA and you are stuck on the new regime regardless of what you select.
Step 6: Verify TDS and Pre-Filled Data
Reconcile TDS with Form 26AS, certificates and the related income. Ask the deductor to correct a missing or incorrect statement and retain evidence. Credit mismatches need the prescribed correction or rectification process; AIS feedback alone does not repair Form 26AS.
Step 7: Submit and E-Verify
E-verify within 30 days using Aadhaar OTP, net banking, or pre-validated bank account.
Common ITR-4 Mistakes That Trigger Notices
- Field E21: Report the supported business-bank balance. A genuine zero balance is possible; do not invent a positive figure to avoid an alleged flag.
- Reporting personal savings balance as business balance. Field E21 covers business accounts only. Personal savings used for living expenses go separately.
- Declaring 6% presumptive profit on cash-heavy turnover. The 6% rate requires the specific receipts to be through digital modes. Non-digital portion is taxed at 8% minimum.
- Mixing 44AD and 44ADA in a single ITR-4. You can have both if your activity warrants (say, a professional with side trading) but report each scheme’s turnover and profit separately.
- Filing ITR-4 with brought-forward losses. Not allowed. Carry-forward losses force ITR-3.
- Section 44AD history: Check whether section 44AD(4) applies before returning to the scheme. Section 44ADA does not have the same five-year restriction.
- Treating gross receipts as net. Section 44ADA applies to gross receipts, not after-expenses figures.
ITR-4 Filing Deadline AY 2026-27
| Action | Deadline |
|---|---|
| ITR-4 non-audit | 31 August 2026 (new) |
| Form 10-IEA (if opting old regime) | Before due date |
| Belated return | 31 December 2026 |
| Revised return | 31 March 2027 |
| E-verification | Within 30 days |
The August 31 deadline for non-audit ITR-3 and ITR-4 is new from AY 2026-27 onwards, acting as a genuine one-month extension over the salaried July 31 deadline.
Prepare an account-by-account filing checklist
List the business accounts and retain each relevant year-end statement. Put the account reference, period and source document next to every balance or receipt total in your working. Reconcile transfers between your own accounts so they are not silently counted as customer receipts.
Keep the basis for the reported turnover and other figures separate from the bank reconciliation. Consult the official ITR-4 instructions for the fields that apply to your case. This article does not read bank PDFs or automatically populate an ITR-4 return. Our AIS and Form 26AS comparison guide provides a practical starting point for the statement checks.
Frequently Asked Questions
Can I file ITR-4 if I have F&O trading income?
Only if your F&O turnover is below ₹3 crore (with 95% digital receipts) and you declare at least 6% as presumptive profit. Most active F&O traders prefer ITR-3 to preserve loss carry-forward.
What if I have a single overdraft account showing negative balance?
Do not deduct it from Field E21. Report only positive balances in E21. The OD outstanding goes under liabilities separately. Do not net them off, as that is a common audit flag.
Can I claim 80C deduction in ITR-4?
Only if you opt out of the new regime and filed Form 10-IEA before the due date. The new regime (default for AY 2026-27) disallows most Chapter VI-A deductions including 80C, 80D, 80E, 80G.
Is partner remuneration from a firm reportable in ITR-4?
No. Partners earning remuneration, interest, or share of profit from a firm cannot file ITR-4 in their individual capacity for that income. They must file ITR-3.
What is the 5-year lock-in under Section 44AD(4)?
Section 44AD(4) looks at whether, after using the scheme, income is declared otherwise than under it within the next five assessment years. Where it applies, the taxpayer is excluded for five assessment years following the exit year. Do not assume every form change, turnover change or lower margin has the same result; review the actual filing history.
Can I file ITR-4 for FY 2025-26 even though I filed ITR-3 for FY 2024-25?
Yes, if the current eligibility requirements are met and section 44AD(4) does not bar the scheme. Review earlier presumptive declarations and exits. Filing ITR-3 in an earlier year is not, by itself, a bar to ITR-4.
Related guides:
- 🏠 Master index: ITR Forms AY 2026-27
- 🟠 ITR-3: When Your Profit Margin is Below Presumptive Rates
- 🟢 ITR-1 Sahaj: For Pure Salaried Filers
Last reviewed: May 26, 2026 | CBDT Notification: 45/2026
Official reference: Income Tax Department ITR utilities, schemas and validation documents. Select AY 2026-27 and the relevant form.
Official source: Always confirm the official ITR-4 form and instructions at incometax.gov.in.
This guide covers FY 2025-26 / AY 2026-27 under the 1961 Act. Filing dates depend on the taxpayer and audit/transfer-pricing conditions, not only the ITR number. Belated returns are generally due by 31 December 2026 and revised returns by 31 March 2027, or completion of assessment if earlier. Revision is subject to section 234-I; check the current utility for any fee. A later CBDT extension applies only to the cases it covers.
Sources: Finance Act 2026, section 5; AY-specific forms and validations; ITR-4 official FAQ; Notified financial particulars.
The information and tools on this page are for general information only and are not legal, tax, accounting or financial advice. For advice on your own situation, use the Professional help form on this page.