ITR-4 (Sugam) is the simplified Income Tax Return form for individuals, HUFs, and partnership firms (excluding LLPs) that opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE of the Income-tax Act, 1961. The form allows small businesses and professionals to declare income at a fixed percentage of turnover without maintaining detailed books of accounts. The Income Tax Department has released the e-filing utility for ITR-4 for FY 2024-25 (AY 2025-26), with significant changes, including the accommodation of limited LTCG up to Rs. 1.25 lakh and new disclosure requirements.
What Is Presumptive Taxation?
Presumptive taxation is a simplified income-computation scheme that frees small businesses and professionals from maintaining detailed books of account. Instead of computing actual profit from books, taxpayers declare income at a predetermined percentage of their turnover or gross receipts.
This scheme benefits small traders, shopkeepers, freelancers, consultants, doctors, lawyers, and other eligible professionals by reducing compliance burden while ensuring minimum tax collection.
Presumptive Taxation Sections
| Section | Applicable To | Turnover/Receipt Limit | Profit Rate | Enhanced Limit (Digital > 95%) |
| 44AD | Eligible businesses (excluding LLPs, specified professionals) | Up to Rs. 2 crore | 8% of turnover (6% for digital receipts) | Rs. 3 crore |
| 44ADA | Specified professionals (CAs, doctors, lawyers, architects, engineers, interior decorators, etc.) | Up to Rs. 50 lakh | 50% of gross receipts | Rs. 75 lakh |
| 44AE | Goods carriage operators | Up to 10 goods vehicles | Rs. 1,000/ton/month (heavy) or Rs. 7,500/month (other) | Not applicable |
Under presumptive taxation, expenses incurred during business operations cannot be separately claimed as deductions, as the profit is deemed to be at the prescribed rate. However, deductions under Chapter VI-A (Section 80C, 80D, etc.) remain available under the old tax regime.
Who Is Eligible to File ITR-4?
ITR-4 is designed for taxpayers with straightforward business or professional income who qualify for and opt for the presumptive scheme.
| Eligible Category | Conditions |
| Resident individuals with business income | Turnover within Section 44AD limits; income computed at 8%/6% |
| Resident individuals with professional income | Gross receipts within Section 44ADA limits; income at 50% |
| HUFs with business income | Same conditions as individuals under 44AD/44AE |
| Partnership firms (not LLPs) | Turnover within 44AD limits; firm-level filing |
| Individuals with salary + presumptive income | Salary from one or more employers plus presumptive business/professional income |
| Freelancers (writers, bloggers, consultants) | Professional income within 44ADA limits |
From FY 2024-25, ITR-4 filers can include long-term capital gains up to Rs. 1.25 lakh in their returns, provided there are no brought-forward or carry-forward capital losses. This is a significant change, allowing presumptive taxpayers to report small equity gains without switching to ITR-2 or ITR-3.
Who cannot file ITR-4?
| Excluded Category | Reason | Alternative Form |
| Total income above Rs. 50 lakh | Exceeds ITR-4 income limit | ITR-3 |
| Company directors | Excluded regardless of income | ITR-2 or ITR-3 |
| Holders of unlisted equity shares | Excluded regardless of income | ITR-2 or ITR-3 |
| LLPs | Excluded from Sections 44AD and 44ADA | ITR-5 |
| Non-residents and RNOR | Only residents eligible | ITR-2 or ITR-3 |
| Taxpayers with capital gains (above Rs. 1.25 lakh or STCG) | Beyond ITR-4’s LTCG accommodation | ITR-2 or ITR-3 |
| Income from more than one house property | Not covered in ITR-4 | ITR-2 or ITR-3 |
| Foreign assets or foreign income | Schedule FA required | ITR-2 or ITR-3 |
| Lottery, horse racing, or gambling income | Special rate income is not covered | ITR-2 or ITR-3 |
| Virtual digital asset (cryptocurrency) gains | Not accommodated in ITR-4 | ITR-2 or ITR-3 |
| Individuals with TDS under Section 194N | Excluded from ITR-4 | ITR-2 or ITR-3 |
| Agricultural income above Rs. 5,000 | Exceeds ITR-4 limit | ITR-2 |
Step-by-Step Filing Process
Step 1. Log in to www.incometax.gov.in using your PAN and password.
Step 2. Navigate to e-File, then Income Tax Returns, then File Income Tax Return. Select AY 2025-26 and ITR-4.
Step 3. Select the tax regime (old with deductions or new under Section 115BAC). Choose the filing mode (online or offline JSON utility).
Step 4. Enter personal details, address, and bank account information. Review pre-filled data from Form 26AS and AIS.
Step 5. Enter salary income (if any) from Form 16, including gross salary, allowances, and Section 16 deductions.
Step 6. Enter house property income (one property only) including rental income, municipal taxes, and interest on housing loan.
Step 7. Enter presumptive business/professional income. For Section 44AD, enter the total turnover and select the profit rate (8% for cash, 6% for digital). For Section 44ADA, enter gross receipts and apply the 50% profit rate.
Step 8. Enter LTCG up to Rs.1.25 lakh (if applicable and no capital loss carry-forward exists).
Step 9. Claim deductions under Chapter VI-A (old regime only): Section 80C, 80D, 80G, etc.
Step 10. Verify tax computation against TDS credits (Form 26AS) and advance tax paid. Pay any balance tax due.
Step 11. Submit and e-verify using Aadhaar OTP, net banking, or other approved methods within 30 days.
Key Changes for FY 2024-25
| Change | Details | Impact |
| LTCG accommodation | ITR-4 now allows LTCG up to Rs. 1.25 lakh without capital loss carry-forward | Small equity/MF gains no longer require switching to ITR-2. |
| Enhanced 44AD limit | Rs. 3 crore turnover limit if digital receipts exceed 95% of total | More businesses qualify for the presumptive scheme |
| Enhanced 44ADA limit | Rs. 75 lakh receipt limit if digital receipts exceed 95% | More professionals qualify |
| New regime default | Section 115BAC (new regime) is the default; the old regime requires active opt-in. | Must choose the old regime to claim 80C/80D deductions |
| AIS reconciliation | Mandatory cross-check with Annual Information Statement | Unreported income triggers notices |
Presumptive Taxation Computation Example
A small trader with an annual turnover of Rs. 1,50,00,000 (Rs. 1.5 crore), where Rs. 1,20,00,000 is received digitally and Rs. 30,00,000 in cash:
| Component | Amount | Rate | Deemed Profit |
| Digital receipts | Rs.1,20,00,000 | 6% | Rs.7,20,000 |
| Cash receipts | Rs.30,00,000 | 8% | Rs.2,40,000 |
| Total deemed profit (Section 44AD) | Rs.9,60,000 | ||
| Add: Salary income | Rs.5,00,000 | ||
| Gross total income | Rs.14,60,000 | ||
| Less: Section 80C deduction (old regime) | Rs.1,50,000 | ||
| Taxable income | Rs.13,10,000 |
The taxpayer reports Rs. 9,60,000 as business profit in ITR-4 without maintaining books of account. No business expense deduction is separately available since profit is deemed at 6%/8%.
Key Terms
• ITR-4 (Sugam): The simplified Income Tax Return form for presumptive taxation under Sections 44AD, 44ADA, and 44AE, designed for small businesses and professionals
• Section 44AD: The presumptive taxation provision for eligible businesses allowing profit declaration at 8% of turnover (6% for digital receipts) without maintaining books
• Section 44ADA: The presumptive provision for specified professionals allowing 50% of gross receipts as deemed profit
• Presumptive Income: Income computed at a fixed percentage of turnover or receipts as prescribed by law, without reference to actual books of accounts
• Digital Receipt Threshold: The condition requiring over 95% of total receipts through digital modes to qualify for enhanced turnover limits under Sections 44AD and 44ADA
Filing ITR-4 Under Presumptive Taxation?
Ensure you qualify for the scheme and report your income correctly. Use WFYI tools to verify your eligibility, calculate deemed profit, and file your return before the deadline.
| Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for advice specific to your situation. |
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Frequently Asked Questions
Q1: Can LLPs file ITR-4 under presumptive taxation?
No. LLPs are explicitly excluded from Sections 44AD and 44ADA. They must file ITR-5 with a regular income computation based on the books of accounts, regardless of their turnover.
Q2: What happens if I declare profit below the presumptive rate?
If you declare profit below 8%/6% (44AD) or 50% (44ADA), you must maintain books of accounts and get a tax audit done if turnover exceeds the audit threshold. You would then file ITR-3 instead of ITR-4.
Q3: Can I claim business expenses in ITR-4?
No. Under presumptive taxation, profit is deemed at the prescribed rate, and no separate deduction for business expenses is available. All expenses are considered absorbed within the deemed profit calculation.
Q4: Is ITR-4 available for taxpayers with capital gains?
From FY 2024-25, ITR-4 accommodates LTCG up to Rs. 1.25 lakh, provided there are no brought-forward or carry-forward capital losses. Any STCG or LTCG above Rs. 1.25 lakh requires ITR-2 or ITR-3.
Q5: What is the filing deadline for ITR-4?
The deadline for ITR-4 for FY 2024-25 (AY 2025-26) is September 16, 2025, for non-audit cases. Since presumptive taxpayers who declare profits at or above the prescribed rates do not require an audit, most ITR-4 filers have this deadline.
