Filing Business Income Under ITR-4? Know the Rules for Choosing and Switching Between Old and New Tax Regimes

New Delhi, June 13: The Income-Tax Department has officially enabled the Excel utilities for key income-tax return (ITR) forms, including ITR-1 (Sahaj), ITR-2, and ITR-4 (Sugam), on its e-filing portal for the financial year 2025–26 (assessment year 2026–27). For individual taxpayers filing business income under the ITR-4 Sugam form, the tax department has outlined strict guidelines regarding deadlines and the process for choosing or switching between the old and new tax regimes. The statutory deadline for filing returns via ITR Forms 3 and 4 is August 31, 2026.

One-Time Switching Rule for Business Income

Under current income tax regulations, individuals reporting business or professional income do not have the flexibility to switch between the old and new tax regimes on an annual basis. Taxpayers who choose to opt out of the default new tax regime in favor of the old regime are granted only a one-time lifetime opportunity to switch back to the new regime. Once a taxpayer reverts to the new tax regime, they are permanently barred from adopting the old tax regime in future assessment years. ITR Filing AY 2026–27: Income Tax Department Enables ITR-2 Excel Utility; Check Forms, Deadlines and Key Details.

Mandate for Form 10-IEA

To successfully opt into the old tax regime, eligible taxpayers must file Form 10-IEA before the statutory ITR filing deadline under Section 139(1) of the Income Tax Act, 1961. This form essentially serves as the official declaration to deviate from the default new tax regime. If a taxpayer later decides to exercise their one-time option to return to the new regime, Form 10-IEA must be submitted a second time to formalize the withdrawal from the old system.

Claiming Deductions under the Old Regime

Taxpayers seeking to claim standard deductions and exemptions must first transition from the default new tax regime to the old tax regime by filing Form 10-IEA within the stipulated deadline. When filling out the ITR-4 form, individuals must manually input the specific date of filing Form 10-IEA alongside its official acknowledgment number within the "Filing Section" under "Part A General-Personal Information" to validate their deduction claims. ITR Filing 2026: Which Income Tax Return Form Should Salaried Taxpayers and Freelancers Choose?

Eligibility Criteria for ITR-4 (Sugam)

The ITR-4 Sugam form is specifically designed for resident individuals, Hindu Undivided Families (HUFs), and firms (excluding Limited Liability Partnerships) who meet the following financial parameters:

• Total income does not exceed INR 50 lakh during the financial year.

• Business or professional income is calculated on a presumptive taxation basis under Sections 44AD, 44ADA, or 44AE.

• Long-term capital gains under Section 112A do not exceed INR 1.25 lakh.

• Income is derived from salary, pension, up to two house properties, or other standard sources like bank interest.

• Agricultural income does not exceed INR 5,000.

Major Exclusions from ITR-4

Conversely, certain criteria automatically disqualify taxpayers from using the Sugam form, requiring them to file more detailed returns. Non-Resident Indians (NRIs) and Residents Not Ordinarily Resident (RNOR) are ineligible. Additionally, individuals cannot use ITR-4 if their total income exceeds INR 50 lakh, if they hold unlisted equity shares, if they serve as a company director, or if they earn income from specific sources such as lotteries, racehorses, or short-term capital gains.