Income Tax Department explains how to choose between ITR-3 and ITR-4: Quick checklist for taxpayers

Taxpayers with business or professional income often face a key question while filing their income tax return: should they use ITR-3 or ITR-4?

The Income Tax Department has shared a quick checklist on X explaining how taxpayers can select the right form for AY 2026-27.

With the deadline for filing non-audit income tax returns set for 31 August, taxpayers should ensure they select the correct ITR before filing.

ITR-4: When can you use it?

According to the Income Tax Department, you should first ask the following questions:

• Are you an individual, Hindu Undivided Family (HUF), or firm, and is your business or professional income being declared under the presumptive taxation scheme?
• Is your total income equal to or less than ₹50 lakh during the financial year?

If the answer to both questions is yes, ITR-4 will be the applicable return form.

ITR-4 (Sugam) is applicable to a resident individual, HUF or resident firm (other than an LLP) having total income of up to ₹50 lakh and income from business or profession computed on a presumptive basis under sections 44AD, 44ADA or 44AE of the Income Tax Act, 1961.

The return can also include income from certain other sources such as:

• Salary or pension
• Income from up to two house properties
• Income from other sources, including interest, family pension and dividend
• Agricultural income of up to ₹5,000
• Capital gains under Section 112A, subject to the applicable limit of ₹1.25 lakh

ITR-4 cannot be filed by taxpayers who have short-term capital gains or long-term capital gains under Section 112A exceeding ₹1.25 lakh. It is also not applicable to those who hold unlisted equity shares or have foreign assets or income.

Taxpayers with losses to be carried forward, deferred ESOP tax, or income chargeable at special rates cannot use ITR-4 either. Directors of companies are also not eligible to file this form.

Who should file ITR-3?

According to the Income Tax Department, taxpayers can ask themselves these questions:

• Are you an individual or HUF with business or professional income, and do you maintain books of account or not come under the presumptive taxation scheme?
• Is your total income more than ₹50 lakh, or do you engage in F&O trading?

If the answer to either of these questions is yes, ITR-3 will be the applicable return form.

ITR-3 is applicable to individuals and HUFs having income under one or more of the following heads:

• Salary or pension
• House property
• Profits and gains from business or profession
• Capital gains
• Income from other sources

The form is generally applicable where the taxpayer is not eligible to file ITR-1, ITR-2 or ITR-4.

ITR-3 vs ITR-4: What did the Income Tax Department say?

• Choose ITR-3: If you are an individual or HUF with business or professional income but do not opt for presumptive taxation, including cases where you maintain regular books of account, have total income above ₹50 lakh, or engage in F&O trading.
• Choose ITR-4: If you are an individual, HUF or firm opting for presumptive taxation of business or professional income, with total income of up to ₹50 lakh.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.