All You Need to Know About ITR-4 Filing for AY 2025-26: Key Changes, Eligibility & Presumptive Taxation

Income Tax Return (ITR) filing season brings many questions for small business owners, professionals, and transporters. For taxpayers relying on the presumptive taxation scheme, ITR-4 remains the go-to simplified return. However, with changes introduced for the Assessment Year (AY) 2025-26, it’s essential to stay updated. Here's a comprehensive guide, based on the latest updates and official insights, to help you navigate ITR-4.

What is ITR-4?

ITR-4 is the return filing form prescribed for individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) opting for the presumptive income scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act, 1961. This form helps eligible taxpayers report income deemed under presumptive taxation, offering a simplified compliance experience without the hassle of maintaining detailed books of accounts.

The Presumptive Taxation Scheme: At a Glance

Presumptive taxation allows eligible taxpayers to declare their income at a prescribed rate, making tax compliance easier for small businesses and professions. The key sections include:

Note: The increased limits apply only if cash receipts are ≤5% of total receipts.

Who Can File ITR-4?

Residents (Individuals, HUFs, Firms except LLPs) with:

• Business income under section 44AD (small businesses)
• Professional income under section 44ADA (professions like doctors, lawyers, etc.)
• Transport income under section 44AE (up to 10 goods vehicles)

Who Cannot File ITR-4?

You are NOT eligible to file ITR-4 if:

• Your total income exceeds ₹50 lakhs
• You are a director in a company
• You have unlisted equity shares
• You are required to maintain books of account under tax law
• You are Resident but not ordinarily resident (RNOR) or a non-resident
• You have more than one house property
• You have taxable capital gains (other than specific cases)
• Your agricultural income exceeds ₹5,000
• You have assets or signing authority outside India
• You are claiming relief for foreign tax paid or double taxation
• You have gains from Virtual Digital Assets (cryptocurrency, NFTs, etc.)
• TDS has been deducted under Section 194N
• Income through lottery, race horses, or legal gambling

Special Note on LTCG:

If you have LTCG (Long Term Capital Gains) only under section 112A (on sale of listed shares etc.), and the gain is up to ₹1.25 lakh, you might still be eligible, but no carry-forward, set-off losses, or complex capital gains allowed.

New Changes in ITR-4 for AY 2025-26

Here are the important updates you should be aware of:

Increased Turnover/Receipts Limits

• Section 44AD (Small Businesses): Limit raised from ₹2 crore to ₹3 crore (if cash receipts ≤5%).
• Section 44ADA (Professionals): Limit increased from ₹50 lakh to ₹75 lakh (if cash receipts ≤5%).

Simplifications: Enrolment Number field has been removed.

Drop-down Facility for Deductions: Easier selection and reporting of eligible deductions.

Major Changes in ITR-1 but Related: LTCG reporting: Only under Section 112A, up to ₹1.25 lakh, with no losses to be carried forward or set off.

Thorough Compliance: Practical Tips

• Verify your eligibility against all exclusion criteria before starting your return.
• Maintain summary evidence (bank statements, digital receipts) even under presumptive regime for reference.
• Clearly segregate digital and cash receipts, as higher limits only apply if cash receipts are within 5% of total.
• Use reliable e-filing platforms or tax professionals for accurate computation—tools like Web-e-Tax can streamline the process.

Conclusion

ITR-4 is designed to reduce the compliance burden for India's small businesses and professionals. Make sure you check your eligibility based on the latest thresholds and detailed criteria. Take advantage of the expanded presumptive limits this year, and file your tax return well before the deadline.