The Income Tax Department has rolled out the ITR-4 form for the Assessment Year (AY) 2025-26, also known as the 'Sugam' form. If you are a freelancer, small business owner, or a professional earning income under the 'presumptive taxation scheme', this one's for you.
But with anything tax-related, the devil is often in the details. Before you rush to file your income tax return for the Financial Year (FY) 2024-25, it is important to understand whether you actually can, or should, use this form.
What is the ITR-4 and Who is it really for?
ITR-4 is designed for individuals, Hindu Undivided Families (HUFs), and partnership firms (other than LLPs) that earn income from business or profession and have opted for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE of the Income Tax Act, 1961.
So if you're a local trader, online seller, small manufacturer, or run a shop or a Kirana store, and you are not keeping elaborate books of accounts but do maintain a rough sales ledger, the ITR-4 might be just right.
This form also includes freelancers: bloggers, vloggers, content writers, graphic designers, and anyone earning income from part-time gigs. Even salaried individuals who have a side hustle, say, consulting, photography, or tutoring, can use this form if their freelance income is under the presumptive scheme.
Professionals, such as chartered accountants, doctors, lawyers, architects, and engineers, if you are not running a full-blown practice and your professional income qualifies under Section 44ADA, the ITR-4 has room for you. Just make sure your total income stays within the limits (more on that below).
What's New in ITR-4 This Year?
One of the key updates this year is the inclusion of long-term capital gains (LTCG) reporting.
Taxpayers can now report LTCG under Section 112A, that is, gains from listed equity shares and equity-oriented mutual funds, within the ITR-4 form provided:
- The total LTCG does not exceed Rs 1.25 lakh
- There are no carry-forward or brought-forward capital losses
Earlier, even small capital gains meant a shift to the more complex ITR-2 forms. This move simplifies things for part-time investors with modest equity gains.
Who can use ITR-4?
Here's a detailed list of who is eligible to use ITR-4 for filing their income tax returns:
You are a resident individual, HUF, or partnership firm (non-LLP)
Your total income is up to ₹50 lakh
You have business/professional income under Section 44AD, 44ADA, or 44AE
You have income from only one house property
Your LTCG is up to Rs 1.25 lakh, with no capital loss to report or carry forward
But Here's the Catch, You Cannot File ITR-4 If…
The exclusions are important. You cannot use the Sugam form if:
Your total income exceeds ₹50 lakh
You are a director in a company
You've invested in unlisted shares
You have more than one house property
You have earned income from lotteries, betting, or horse races
You hold foreign assets or signing authority in overseas accounts
You've earned income from Virtual Digital Assets like crypto
You want to claim relief under DTAA or foreign tax relief under Sections 90/90A/91
Your agricultural income exceeds Rs 5,000
You are a non-resident or resident but not ordinarily resident (RNOR)
Also, if your business turnover is over Rs 2 crore (or Rs 3 crore if 95 per cent of receipts are digital), you must switch to ITR-3, which requires maintaining books of accounts and involves a lot more paperwork.
The Sugam ITR form is supposed to simplify the process for small earners and entrepreneurs.
It is short, structured, and doesn't need you to calculate detailed income statements, the assumption is that your profits are calculated on a presumptive basis (8 per cent of gross receipts, or 6 per cent in case of digital receipts for 44AD, for example).
If you're unsure whether your income qualifies under presumptive taxation or whether ITR-4 is the right fit, it's always smart to consult a tax advisor. Filing the wrong form or underreporting income could lead to notices, penalties, and a lot of avoidable back-and-forth with the tax department.
