Income Tax Department's checklist: How to pick between ITR-3 and ITR-4 for AY 2026-27

Choosing the right income tax return form

With the deadline for filing non-audit income tax returns for the assessment year 2026-27 set for 31 August, the Income Tax Department has published a checklist on X to help taxpayers with business or professional income decide between ITR-3 and ITR-4. The guidance, reported by Livemint, addresses a common source of confusion: which return form applies to a given taxpayer's situation.

According to the department, the choice hinges on whether the taxpayer opts for presumptive taxation and whether their total income stays within the ₹50 lakh threshold. The checklist is designed for individuals, Hindu Undivided Families (HUFs), and firms, and it lays out the conditions under which each form applies.

ITR-4: When does it apply?

ITR-4 (Sugam) is applicable to a resident individual, HUF, or resident firm (other than an LLP) with total income 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 department's checklist directs taxpayers to ask two questions: whether they are an individual, HUF, or firm declaring business or professional income under the presumptive taxation scheme, and whether their total income for the financial year is ₹50 lakh or less. If the answer to both is yes, ITR-4 is the applicable form.

The form can also include certain other incomes, such as salary or pension, income from up to two house properties, income from other sources like interest, family pension, and dividend, agricultural income up to ₹5,000, and capital gains under Section 112A up to the applicable limit of 25 lakh.

However, ITR-4 cannot be used by taxpayers who have short-term or long-term capital gains under Section 112A exceeding 25 lakh. It is also not applicable to those who hold unlisted equity shares, have foreign assets or income, have losses to be carried forward, have deferred ESOP tax, have income chargeable at special rates, or are directors of companies.

ITR-3: Who should use it?

ITR-3 is the form for individuals and HUFs who have income under one or more of the following heads: salary or pension, house property, profits and gains from business or profession, capital gains, or income from other sources. As per the department's guidance, ITR-3 is meant for those with business or professional income who do not opt for presumptive taxation — including taxpayers who maintain regular books of account — as well as those with total income above ₹50 lakh or those engaged in futures and options (F&O) trading.

The department's message also reminded taxpayers with business or professional income to file their applicable return form — whether ITR-3, ITR-4, ITR-5, or ITR-7 — by 31 August 2026 if their return falls under the non-audit category.

Documents to verify before filing

Before submitting their returns, taxpayers are advised to review key documents to avoid errors. Form 26AS provides details of tax deducted at source (TDS) and tax collected at source (TCS). The Annual Information Statement (AIS) offers a broader picture of financial information reported to the tax department, including TDS, TCS, specified financial transaction (SFT) information, tax payments, refund and demand details, and certain GST-related information.

Form 16A is a quarterly TDS certificate issued by the person or entity deducting the tax. Additionally, taxpayers may need to consider Forms 15G and 15H to avoid TDS on certain incomes: Form 15G can generally be submitted by eligible resident individuals below 60 years, HUFs, and certain other taxpayers, while Form 15H is for eligible resident individuals aged 60 years or above.

For taxpayers whose accounts require audit under section 44AB of the Income Tax Act, 1961, a tax audit report must be furnished. The report is contained in Form 3CB, while Form 3CD contains the statement of particulars required under that section. For those with specified international or domestic transactions, Form 3CEB details these transactions under section 92E and is obtained from a chartered accountant.

The deadline for audit cases for AY 2026-27 is 31 October 2026, according to the guidance.

The article includes a disclaimer advising taxpayers to consult a qualified expert for the latest laws and regulations.