Summary of this article
ITR-4 now allows taxpayers to report up to two house properties
Mandatory bank account disclosure increases compliance requirements for presumptive taxation taxpayers
Incorrect ITR-4 eligibility or disclosure can trigger defective return scrutiny notices
Late ITR filing may attract Section 234F penalty and additional interest charges
If you look at this year's ITR-4 (simplified Income Tax Return form for resident individuals, Hindu Undivided Families (HUFs), and firms (other than Limited Liability Partnerships (LLPs)) with total income up to Rs 50 lakh), changes in isolation, each one seems like a small administrative tweak. But step back and look at the full picture, and a clearer story emerges—the Income Tax Department (ITD) is quietly but firmly raising the bar on what presumptive taxpayers are expected to disclose. The form has grown more inclusive on one hand and more demanding on the other, and understanding both sides of that equation matters enormously for anyone filing under this route.
ITR-4 Relief Comes With Tighter Disclosure Expectations
The permission to include two house properties within ITR-4 is the kind of change that will genuinely make a difference for a large number of middle-income earners and small business owners who own a second home. “For years, that second property forced them into a more complex return form, even when everything else about their tax profile was straightforward. That inconvenience has now been removed — though the Rs 50 lakh income ceiling has not moved an inch, and both properties must stay well within that boundary for ITR-4 to remain a valid choice,” says Priyal Goel Jain, partner and NRI tax expert, Dinesh Aarjav and Associates Chartered Accountants.
The mandatory bank balance disclosure under the schedule of business or profession (BP) is where things get more serious. Until last year, reporting bank balances in this schedule was left to the taxpayer's discretion—some did, many did not. That discretion is now gone. Every active bank account held during the year must be reported, no exceptions. For freelancers and small traders running multiple accounts across different banks, this is a significant shift.
The department already has this information through the Annual Information Statement, so the change is less about gathering new data and more about making taxpayers own that disclosure formally and explicitly.
The removal of foreign retirement account fields may look like a simplification, but it is really just a tidying-up exercise. Taxpayers with overseas accounts like a US 401(k) were never really suited to ITR-4 in the first place—they belong in ITR-2 or ITR-3, given their foreign asset reporting obligations. Those obligations have not changed at all. The department has simply removed a set of fields from a form where they did not belong.
“The two changes that are easiest to overlook—the retirement of the 28-digit Aadhaar Enrolment ID and the new section-specific column in Schedule-TDS—deserve far more attention than they typically receive. Getting either of these wrong does not result in a gentle reminder from the department. It can trigger an automated flag that moves the file into a scrutiny queue well before any officer has even glanced at the return. These details feel minor until they are not,” says Jain.
The Fine Print Behind ITR-4 Eligibility
ITR-4 has always been a form with clearly drawn edges, and this year is no different. It works for resident individuals, HUFs, and firms other than LLPs whose total income stays within Rs 50 lakh and who are opting for presumptive taxation under Section 44AD, 44ADA, or 44AE. Salary, pension, agricultural income up to Rs 5,000, savings interest, family pension, and similar passive income sources can sit alongside the presumptive income without any problem.
The inclusion of Long-Term Capital Gains (LTCG) under Section 112A is a thoughtful addition, but it comes with a condition that must be read carefully. The gains cannot exceed Rs 1.25 lakh, and there must be no capital losses being carried forward from prior years. Both conditions must be true at the same time. “A taxpayer who satisfies only one of them and still files ITR-4 is not operating in a gray area—they are filing a defective return, and the consequences of that are far more disruptive than simply choosing the right form from the beginning,” says Jain.
The list of people who cannot use ITR-4 is long, and none of it is ambiguous. Non-residents, Resident but Not Ordinarily Residents (RNORs), company directors, holders of unlisted equity shares, individuals deferring Employee Stock Option Plan (ESOP) tax from eligible start-ups, and those with income falling under Sections 115BBDA or 115BBE must use a different form, full stop.
There is no workaround, no interpretation that stretches eligibility, and no benefit of the doubt available here. Where it gets genuinely tricky is for taxpayers sitting right at the edge of eligibility—particularly those who now have two house properties and whose combined income from all sources is inching toward Rs 50 lakh.
“For these filers, the honest advice is to seriously consider ITR-3, even if ITR-4 technically remains within reach. Dealing with a defective return notice after the fact is a draining and time-consuming experience. Choosing the slightly more detailed form upfront costs far less in time and stress than fixing a problem that should never have arisen,” says Jain.
Why Taxpayers Should Avoid Last-Minute Filing
The dates are clear: 31 August 2026 for non-audit filers and 31 October 2026 for those whose accounts are subject to audit, unless the Government steps in with an extension. Missing the August deadline does not mean all is lost — a belated return can be filed up to 31 December 2026. But that comfort comes at a price.
Late fees under Section 234F can go up to Rs 5,000, and interest under Section 234A adds further cost on top of that. The belated filing window is a safety net, not a scheduling option.
Budget 2026 has extended the revised return deadline to 31 March 2027, and that is genuinely useful for taxpayers who discover an error after their original submission. But this provision tends to breed a certain complacency about first-time filings that is worth resisting.
When you file a revised return, the department naturally looks at what changed and why. That additional attention is something most taxpayers would rather not invite, and the best way to avoid it is to get the original return right.
FAQs
1. Who can use ITR-4 for AY 2026-27?
Resident individuals, HUFs, and firms (excluding LLPs) with income up to Rs 50 lakh opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE can use ITR-4.
2. What is the biggest disclosure change in the new ITR-4 form?
Taxpayers must now mandatorily disclose all active bank accounts under the business or profession schedule, making reporting requirements stricter than before.
3. Can taxpayers with capital gains still file ITR-4?
Yes, but only if Long-Term Capital Gains under Section 112A do not exceed Rs 1.25 lakh and there are no carried-forward capital losses.
