ITR-4 (Sugam) decoded: Who can file, what’s new for AY 2025–26 -- check details

If you’re a small business owner, professional, or self-employed individual earning up to Rs 50 lakh annually, the ITR-4 (Sugam) form might be your easiest route to file taxes for AY 2025–26. The Central Board of Direct Taxes (CBDT) rolled out ITR-4 (SUGAM) for AY 2025-26 via Notification No. 40/2025 dated 29.04.2025, effective from 1st April 2025.  

With some key updates this year, here’s what you need to know before choosing this simplified return form.

What is ITR 4?

ITR-1 and ITR-4 cater to small and medium taxpayers seeking a streamlined income reporting process, while ITR-2 and ITR-3 are designed for taxpayers with more intricate income streams such as capital gains and foreign income. ITR-4 is suitable for individuals, HUFs, and Firms (excluding LLPs) who are residents with a total income of up to Rs 50 lakh. This category must also have income from business or profession calculated under sections 44AD, 44ADA, or 44AE, as well as long-term capital gains under section 112A up to Rs 1.25 lakh.

Individuals who fall under any of the following criteria are not eligible to use this form: company Directors, owners of unlisted equity shares, recipients of deferred income tax on ESOP, individuals with agricultural income exceeding Rs 5,000, or individuals with assets (including financial interest in any entity) located outside India.

Who can file ITR-4?

ITR-4 is meant for resident individuals, Hindu Undivided Families (HUFs), and partnership firms (other than LLPs) who’ve opted for presumptive taxation under Sections 44AD (for small businesses), 44ADA (for professionals like doctors, lawyers, architects), or 44AE (for goods transporters). Your total income, including business or professional receipts, house property, interest, or family pension, must not exceed Rs 50 lakh.

What’s new this year?

A major update for AY 2025–26 is that taxpayers with long-term capital gains of up to Rs 1.25 lakh can now also use ITR-4. This brings some flexibility if you had modest equity or property gains during the year and otherwise fall under presumptive taxation.

Another addition is around the tax regime selection. If you’re planning to opt out of the new regime under Section 115BAC and continue with the old tax slab system, the form will ask if you had filed Form 10-IEA in AY 2024–25. If you didn’t (say, because you filed ITR-1 or ITR-2 last year), you must now submit Form 10-IEA this year to switch regimes—and that too before your return filing due date under Section 139(1).

"The revised Form ITR-4 (Sugam) now includes a separate line item titled 'Income on which no tax is payable: Long-Term Capital Gains under Section 112A not chargeable to Income-tax,' also allowing taxpayers to report such exempt LTCG," said CA Dr Suresh Surana. 

                                           

> This update enables taxpayers who are otherwise eligible to use ITR-1 or ITR-4 and who also have exempt LTCG income under Section 112A (such as gains from the sale of listed equity shares or units of equity-oriented mutual funds) to report such income directly within these simplified forms. However, carry forward and/or set-off of capital losses details cannot be provided in these forms.

What should taxpayers do now?

If you’re eligible for presumptive taxation and have no complex income sources, ITR-4 keeps your filing simple. But check your capital gains and make sure you act on the Form 10-IEA requirement in time if you're switching tax regimes. Missing that deadline could lock you into the new regime for the year.

Which taxpayers cannot use ITR-4

The revised ITR-4 form now caters to small taxpayers by excluding individuals with income over Rs 50 lakh, foreign assets, unlisted equity shares, or directorship in a company. It also disqualifies non-residents, people with multiple house properties, or individuals under the presumptive taxation scheme who do not meet specific conditions, like professionals with gross receipts exceeding the threshold for Section 44ADA.

The recent Ministry of Finance notification (G.S.R. 271(E)) amended the Income-Tax Rules, 1962 to simplify compliance for small taxpayers. The updated ITR-4 form now includes sections for personal information, income sources, and deductions, including those under Section 80CCH to meet the requirements of the new tax regime.