ITR-4 Sugam AY 2026-27: New Bank Balance Disclosure Rule Explained

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 small equity LTCG, 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.

Why does this matter? The Department now has a direct cross-check: your declared presumptive profit, your AIS deposit figures, and your year-end bank balance must form an internally consistent story. Mismatches will trigger scrutiny. If you declare ₹15 lakh presumptive income but show a year-end bank balance of ₹2 crore, expect a notice.

Change 2: LTCG Under Section 112A Up to ₹1.25 Lakh Now Allowed

Previously, any capital gain disqualified you from ITR-4. From AY 2026-27, you can include listed equity LTCG up to ₹1.25 lakh (Section 112A) without losing eligibility. 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

Exclusions: agency businesses, businesses earning commission or brokerage, and businesses already covered under Section 44AE (goods transport).

Section 44ADA for Specified Professionals

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

For this consultant with low expenses, ITR-4 saves ~₹4.78 lakh in tax. It is clearly worth it.

Example 2: Digital Agency, ₹40 Lakh Receipts

For this agency with high subcontractor and overhead costs, ITR-3 saves ~₹1.41 lakh. Books and audit overhead are absolutely worth it.

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 every TDS entry against your records. Any client TDS missing from Form 26AS must be followed up before filing because you cannot claim TDS credit not visible to the system.

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

1. Skipping Field E21 or entering zero to keep it simple. A blank or zero E21 is now a red flag. Every business has some bank balance.
2. Reporting personal savings balance as business balance. Field E21 covers business accounts only. Personal savings used for living expenses go separately.
3. 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.
4. 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.
5. Filing ITR-4 with brought-forward losses. Not allowed. Carry-forward losses force ITR-3.
6. Forgetting that 44AD has a 5-year lock-in. Once you opt out (declare profit lower than 6% or 8%), you cannot return to 44AD for five assessment years.
7. Treating gross receipts as net. Section 44ADA applies to gross receipts, not after-expenses figures.

ITR-4 Filing Deadline AY 2026-27

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.

How Reconscribe Simplifies ITR-4 Filing

ITR-4 looks simple but the new Field E21 requires you to pull March 31 balances from every business bank account and sum them. Manually, this means digging through six PDF bank statements and hoping no account is missed.

Reconscribe ingests every bank PDF, identifies the March 31 closing balance for each, aggregates the business accounts into the E21 figure, and cross-checks against your AIS deposits and presumptive turnover, flagging mismatches before you file. You get the same reconciliation muscle for AIS interest, TDS credits, and capital gains.

→ Start your ITR-4 reconciliation with Reconscribe

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)?

If you opt for 44AD presumptive scheme in any year and subsequently declare profits lower than 8% or 6% (or do not opt for 44AD), you cannot return to the scheme for the next five assessment years. The lock-in applies only if your declared profit drops below the presumptive rate, not if you exit because turnover exceeds the limit.

Can I file ITR-4 for FY 2025-26 even though I filed ITR-3 for FY 2024-25?

Yes, provided you meet ITR-4 eligibility this year. Section 44AD’s 5-year lock-in applies only when you previously opted in and then opted out by declaring lower profit. Filing ITR-3 in the past is not, by itself, a bar to ITR-4 now.

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 Act, 2025 (as amended by the Finance Act, 2026), Income Tax Department.