Tag: ITR-4

Presumptive Taxation Under Section 58: Businesses, Goods Transporters and Professionals (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 22 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Section 58 of the Income-tax Act, 2025 combines the old sections 44AD, 44AE and 44ADA: a resident individual, HUF or firm (other than an LLP) can declare income at a fixed percentage of receipts instead of keeping full accounts.
  • For a business, income is 6% of receipts received in banking or online mode and 8% of the rest, if turnover is up to ₹2 crore (₹3 crore if cash receipts are at most 5%); for a specified profession, 50% of gross receipts up to ₹50 lakh (₹75 lakh if cash is at most 5%).
  • For goods carriages (up to ten vehicles), income is ₹1,000 a ton a month for heavy vehicles and ₹7,500 a month for others.
  • Declaring a lower profit than the presumptive figure means books and a tax audit if total income is above the exemption limit; opting out and in again locks you out for five years.

Small businesses and professionals can pay tax without keeping detailed accounts, by declaring a fixed share of their receipts as profit. In the 1961 Act these were three sections: 44AD (small business), 44AE (goods carriages) and 44ADA (professionals). The Income-tax Act, 2025 puts them in one section, section 58. The rules are the same in substance, except that the Finance Act, 2026 dropped one condition (that no deduction under section 144 is claimed).

The three presumptive cases (section 58(2))

Case Who Limit on receipts Income taken as
1. Any business other than goods carriage business Eligible assessee Up to ₹2 crore; or up to ₹3 crore if cash receipts are 5% or less of total turnover The higher of: (i) 6% of turnover received by specified banking or online mode during the tax year or before the due date for the return plus 8% of the remaining turnover; or (ii) the profit actually earned
2. Plying, hiring or leasing goods carriages A person who owns not more than ten goods carriages at any time in the year No turnover limit The higher of: (i) for a heavy goods vehicle, ₹1,000 per ton of gross vehicle weight or unladen weight per month or part of month, and for any other goods carriage ₹7,500 a month; or (ii) profit actually earned
3. Specified profession (section 62(4)) Specified assessee Up to ₹50 lakh; or up to ₹75 lakh if cash receipts are 5% or less of gross receipts The higher of 50% of gross receipts or the profit actually earned

A heavy goods vehicle is one with a gross vehicle weight above 12,000 kg. A person in possession of a goods carriage on hire purchase or instalments is treated as its owner (section 58(11)).

Who is eligible (section 58(11))

  • Eligible assessee (case 1): a resident individual, HUF or firm other than an LLP who has not claimed a deduction under Chapter VIII-C for the year, does not carry on a specified profession, does not earn commission or brokerage, and does not carry on an agency business.
  • Specified assessee (case 3): a resident individual or a firm other than an LLP.
  • A company, an LLP and a non-resident cannot use cases 1 and 3. Case 2 is open to any assessee who owns not more than ten goods carriages.

Specified professions (section 62(4)): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology, company secretary, and any other profession notified by the Board.

Banking or online mode

Digital receipts are those by an account payee cheque or bank draft, by electronic clearing through a bank account, or by another prescribed electronic mode (section 66(32)). A cheque or draft that is not account payee is treated as cash (section 58(9)). Receipts up to the due date for the return count as digital if made by that date.

Other rules

  • No further deductions (section 58(4)): no loss, allowance or deduction is allowed against the presumptive income. All business expenses, including depreciation, interest and salaries, are deemed covered.
  • Firms (section 58(5)): for goods carriages, a firm deducts the salary and interest paid to its partners, within the limits of section 35(e).
  • Written down value (section 58(6)): the written down value of an asset used in the business is computed as if depreciation had been claimed and allowed each year, which matters if you leave the scheme or sell the asset.
  • Books and audit not needed (section 58(10)): sections 62 and 63 do not apply to the goods carriage business.

Declaring a lower profit

An assessee can claim that the profits actually earned are lower than the presumptive figures. If he does so and his total income exceeds the basic exemption limit, he must keep books of account under section 62 and get them audited under section 63 (section 58(3)). See our post on books of account and tax audit.

The five year lock-out (section 58(7) and (8))

If an eligible assessee declares presumptive profit for a year under case 1 and in any of the next five years declares profit lower than that, without following the section, he cannot use the section for five tax years after the year in which he did so. In those years, if his total income exceeds the exemption limit, he must keep books and get an audit.

Examples

1. Trader. Turnover ₹1,50,00,000, of which ₹1,20,00,000 was received by bank transfer and ₹30,00,000 in cash.

  • Digital receipts at 6% = ₹7,20,000
  • Other receipts at 8% = ₹2,40,000
  • Presumptive income = ₹9,60,000, unless actual profit is higher.
  • Turnover is within ₹2 crore, so the scheme applies. If cash were more than 5% of turnover and turnover above ₹2 crore, it would not.

2. Professional. A chartered accountant has gross receipts of ₹40,00,000. Presumptive income is 50% = ₹20,00,000. Where gross receipts are ₹60,00,000 with cash up to 5%, the scheme still applies (limit ₹75 lakh); with cash above 5% it does not (limit ₹50 lakh).

3. Transporter. Owns 2 heavy vehicles of 16 tons gross weight and 1 light goods vehicle, all for the whole year.

  • Heavy: 1,000 × 16 × 12 = ₹1,92,000 each, for two: ₹3,84,000
  • Light: 7,500 × 12 = ₹90,000
  • Presumptive income = ₹4,74,000, unless actual profit is higher.

Return form

A resident individual, HUF or a firm other than an LLP with presumptive income can file SUGAM (ITR-4) if they also meet the other conditions of Rule 164(6): no foreign assets or income, no directorship, no unlisted shares, total income up to ₹50 lakh, no more than two house properties, and no brought forward loss or loss to carry forward (see our post on which ITR form to file). The due date is 31 August if the accounts are not audited, and 31 October if they are audited.

Choosing: presumptive or full accounts

Point Presumptive Full accounts
Books Not required (unless you declare a lower profit) Required (section 62 conditions)
Audit Not required Required if turnover is above the limits
Expenses Not claimed Claimed in full
Loss Not available Can be carried forward
Best when Real margins are below the presumptive percentage Real margins are lower, or you want to claim losses

If your real profit is below the presumptive percentage and you have high expenses or losses, full accounts may reduce tax, but remember the books and audit costs.

Frequently asked questions

Who can opt for presumptive taxation?

A resident individual, HUF or firm other than an LLP (the “eligible assessee”), who has not claimed any deduction under Chapter VIII-C for the year, does not carry on a specified profession, and does not earn commission or brokerage or carry on any agency business. A “specified assessee” (resident individual or firm other than an LLP) can use the scheme for specified professions (section 58(11)).

What is the limit for business turnover?

₹2 crore, or ₹3 crore if cash receipts do not exceed 5% of total turnover. Receipts by a cheque or draft that is not account payee are treated as cash (section 58(9)).

How is business income worked out?

6% of the turnover received in specified banking or online mode during the year or before the return due date, plus 8% of the remaining turnover, or the profit actually earned if higher (section 58(2), Table serial 1).

How much do professionals declare?

50% of gross receipts, or the actual profit if higher, if gross receipts are up to ₹50 lakh (₹75 lakh if cash receipts are at most 5%). The scheme covers legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary professions, and others notified (section 62(4)).

Can I claim a lower profit?

Yes, but you must then keep books of account and get them audited if your total income exceeds the basic exemption limit (section 58(3)).

What if I leave the scheme?

If you declare presumptive profit for a year and then, in any of the next five years, declare a lower profit without following the scheme, you cannot use the scheme for the five years after that year, and you must keep books and get an audit if income exceeds the exemption limit (section 58(7) and (8)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Which ITR Form to File: ITR-1 to ITR-7 and ITR-UN Under Rule 164 (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 23 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Rule 164 of the Income-tax Rules, 2026 fixes the return form by taxpayer: SAHAJ (ITR-1) for simple resident individual income up to ₹50 lakh, ITR-2 for other individuals and HUFs without business income, SUGAM (ITR-4) for presumptive business income, ITR-3 for other business or profession income, ITR-5, 6 and 7 for other entities, and ITR-UN for updated returns.
  • ITR-1 is no longer limited to one house property: it now allows up to two, with no loss to carry forward, and long-term capital gains up to ₹1,25,000 under section 198.
  • Foreign assets, foreign income, directorship, unlisted equity shares held at any time in the year, agricultural income above ₹5,000 or total income above ₹50 lakh take you out of ITR-1 and ITR-4.
  • Return forms for tax year 2025-26 and earlier are those of that year (Rule 164(14)).

Filing on the wrong form can make the return defective or invalid. For tax year 2026-27, Rule 164 of the Income-tax Rules, 2026 lays out which form each type of taxpayer must use. This post summarises it. A return of tax year 2025-26 or earlier uses the form that applied in that year (Rule 164(14)).

The forms at a glance

Form For
SAHAJ (ITR-1) A resident individual (other than not ordinarily resident) with income from salary or family pension, house property (up to two), other sources, or small long-term capital gains, within the limits below
ITR-2 Individuals and HUFs with no income from business or profession who cannot use ITR-1
SUGAM (ITR-4) A resident individual, HUF or firm (other than an LLP) with presumptive business or professional income under section 58, and the other ITR-1-type conditions
ITR-3 Individuals and HUFs with business or professional income who cannot use ITR-1, ITR-2 or ITR-4
ITR-5 A person who is not an individual, HUF or company, and not covered by ITR-7: for example a firm, LLP, AOP or BOI
ITR-6 A company that is not required to use ITR-7
ITR-7 Persons including companies required to file under section 349 or Schedule VIII (trusts and institutions) or section 263(1)(a)(iv) or (v)
ITR-UN An updated return under section 263(6)

ITR-1 (SAHAJ): who can use it

A resident individual who is not a not ordinarily resident, whose total income includes income under:

  • Salaries, or family pension (section 93(1)(d)); or
  • House property, where he owns not more than two house properties and has no brought forward loss or loss to be carried forward under the head; or
  • Other sources, except winnings from lottery or income from race horses, and with no loss under the head; or
  • Capital gains, only if the gains are long-term gains under section 198 (listed equity with securities transaction tax) of not more than ₹1,25,000, with no brought forward loss or loss to carry forward.

Who cannot use ITR-1 (Rule 164(3))

  • anyone with assets (including a financial interest in an entity) located outside India, or signing authority in an account abroad, or income from any source outside India;
  • anyone with income to be apportioned under section 10;
  • a person who claims a deduction under section 93 other than under section 93(1)(d);
  • a director in a company;
  • a person who held any unlisted equity share at any time in the tax year;
  • a person assessable on income on which tax was deducted in the hands of another person;
  • a person who claims relief under section 159 or deduction under section 160 (foreign tax);
  • agricultural income above ₹5,000;
  • total income above ₹50 lakh;
  • a person on whom tax has been deducted under section 393(3) (Table serial 5);
  • a person whose tax payment or deduction has been deferred under section 391(2) or 392(3) (the ESOP of a start-up);
  • anyone with income on which tax is determined under Part A of Chapter XIII of the Act.

ITR-2

For an individual or HUF who is not eligible for ITR-1 and whose total income does not include business or professional income. It suits you if you have capital gains beyond the ITR-1 limit, more than two house properties, foreign assets or income, are a non-resident or a not ordinarily resident, are a director or hold unlisted shares, or have income above ₹50 lakh.

SUGAM (ITR-4)

For a resident (other than not ordinarily resident) individual or HUF, or a firm other than an LLP, who:

  • earns income from business or profession computed under the presumptive provisions of section 58; and
  • has capital gains, if any, only of long-term gains under section 198 up to ₹1,25,000.

A person cannot use ITR-4 if he has any of the exclusions in Rule 164(6): foreign assets, income or signing authority, a directorship, unlisted shares, total income above ₹50 lakh, more than two house properties, any brought forward loss or loss to carry forward under any head, agricultural income above ₹5,000, income of the nature in section 17(1)(d) on which tax is deferred (start-up ESOPs), relief or deduction for foreign tax, or income on which tax is determined under Part A of Chapter XIII.

ITR-3

For an individual or HUF with business or professional income who is not covered by the ITR-1, ITR-2 or ITR-4 rules. This includes presumptive taxpayers who do not meet the ITR-4 conditions, and professionals and traders who keep books of account.

ITR-5, ITR-6 and ITR-7

  • ITR-5: persons other than individuals, HUFs and companies who do not fall under ITR-7.
  • ITR-6: companies that do not fall under ITR-7.
  • ITR-7: trusts, institutions, companies registered under section 8 of the Companies Act, 2013 and others who must file under section 349 or Schedule VIII (Table serial 1.D(f)) or section 263(1)(a)(iv) or (v).

ITR-UN: the updated return

A person eligible to file an updated return under section 263(6) uses Form ITR-UN (Rule 165). See our post on late, revised and updated returns for the time limits and additional tax.

Examples

Taxpayer Form
Salaried, one house with a home loan, bank interest ITR-1
Salaried, sold listed shares and made long-term gain of ₹1,80,000 ITR-2 (the gain exceeds ₹1,25,000)
Salaried with RSUs of a foreign parent ITR-2 (foreign asset)
Salaried with three house properties ITR-2
Freelancer on presumptive income, income ₹18 lakh, no foreign assets ITR-4
Freelancer with a business loss carried forward ITR-3
Director of a private company ITR-2 or ITR-3
Firm or LLP ITR-5 (ITR-4 for a firm that is not an LLP and meets the presumptive conditions)
Company ITR-6
Charitable trust ITR-7

How to furnish and verify the return (Rule 164(11) and (12))

  • Nothing is attached to the return: no tax computation, proof of TDS or TCS or advance tax, or accounts or audit reports are to accompany it; keep them to produce on demand.
  • A company files electronically under digital signature.
  • A person whose accounts are audited files electronically under digital signature or transmits the data under an electronic verification code.
  • Any other person files electronically under digital signature, or with an electronic verification code, or transmits the data and then submits the verification in Form ITR-V.
  • An individual aged 80 or more filing ITR-1 or ITR-4 may also use the paper form.

Before you file

  1. List every source of income, every foreign asset and every unlisted share you held at any time in the year.
  2. Check the ITR-1 exclusions first, because most mistakes come from missing a foreign asset, an unlisted share or a directorship.
  3. Use the form that the department has notified for your year, as the utility may include details not in this summary.

Frequently asked questions

Who can file ITR-1 (SAHAJ)?

A resident other than not ordinarily resident individual whose total income does not exceed ₹50 lakh and includes salary or family pension, income from up to two house properties with no loss to carry forward, other sources (but not lottery or race horse income) with no loss, or long-term capital gains under section 198 up to ₹1,25,000, and who has none of the exclusions in Rule 164(3).

Who cannot file ITR-1?

Anyone with assets or signing authority outside India, foreign income, a directorship, unlisted equity shares held at any time in the tax year, agricultural income above ₹5,000, total income above ₹50 lakh, a non-resident or not ordinarily resident status, or income assessable in the hands of another person on which tax was deducted from that person.

Which form for capital gains?

ITR-1 only if the gains are long-term gains under section 198 of up to ₹1,25,000 and there is no brought forward loss. Short-term gains, gains above that figure or other types need ITR-2 (no business income) or ITR-3.

Which form for a freelancer or small business?

SUGAM (ITR-4) if you are a resident individual, HUF or firm (other than an LLP) with presumptive income under section 58, with none of the exclusions in Rule 164(6). Otherwise ITR-3.

Which form for a company or a trust?

ITR-6 for a company other than one that must use ITR-7. ITR-7 for persons who must file under the provisions for trusts and institutions (section 349, Schedule VIII and section 263(1)(a)(iv) or (v)). ITR-5 for firms, LLPs, AOPs, BOIs and other persons.

How is the return verified?

Electronically under a digital signature or by an electronic verification code, or, for most individuals, by sending the ITR-V after transmitting the data. An individual aged 80 or more filing ITR-1 or ITR-4 may also file on paper (Rule 164(12)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.