ITR-1 vs ITR-4: Which Form Should You File Before the Deadline? [AY 2026-27]

If your income is salary, pension, or interest — and your total is under ₹50 lakh — file ITR-1 (Sahaj) by 31 July 2026. If you run a small business or freelance practice under presumptive taxation (Sections 44AD, 44ADA, or 44AE), file ITR-4 (Sugam) by 31 August 2026.

ITR-1 vs ITR-4: Which Income Tax Form Is Right for You?

Every year, millions of Indian taxpayers face the same question — should I file ITR-1 or ITR-4? Both forms look similar on the surface: both are simplified returns, both apply to incomes up to ₹50 lakh, and both are available for AY 2026-27. But filing the wrong one can result in a defective return notice, delayed refund, or worse — a scrutiny call from the Income Tax Department. This guide breaks down every difference so you can file with complete confidence.

In this article

1. What are ITR-1 and ITR-4?

2. Who can file which form — eligibility at a glance

3. Three new rules for AY 2026-27 that change the answer

4. Presumptive taxation under ITR-4 explained simply

5. Worked examples with real ₹ figures

6. Deadlines, late fees, and what you lose by filing late

7. Old vs new tax regime — which to pick

8. The edge case most articles miss

9. Common misconception corrected

10. What to do today — one action step

11. FAQ

12. Related tools and resources

13. Official sources

What are ITR-1 and ITR-4

The Income Tax Department gives you seven ITR forms, each mapped to a different type of taxpayer. ITR-1, nicknamed Sahaj (Hindi for "easy"), is designed for salaried individuals. ITR-4, nicknamed Sugam ("simple"), covers small business owners and professionals who opt for presumptive taxation — a scheme that lets you declare income as a fixed percentage of turnover, without maintaining elaborate books of accounts.

Both forms are for the assessment year (AY) 2026-27, which means you are filing for income earned in financial year (FY) 2025-26 — 1 April 2025 to 31 March 2026. Even though the new Income Tax Act 2025 came into force on 1 April 2026, AY 2026-27 is governed entirely by the older Income Tax Act, 1961. The new Act takes effect from AY 2027-28.

CBDT notified all ITR forms for AY 2026-27 on 30 March 2026. Online filing utilities for ITR-1 and ITR-4 are already live on the e-filing portal.

Who can file which form — eligibility at a glance

Use this table as your first filter. If even one "cannot file" condition applies to you, move to the next form.

Source: Income Tax Department, incometax.gov.in — ITR-1 and ITR-4 eligibility for AY 2026-27. CBDT Notification dated 30 March 2026.

Not sure which regime saves you more tax?

Get your exact figure in seconds — use our Income Tax Calculator on Toolisky. Compare old vs new regime side-by-side for AY 2026-27.

Three new rules for AY 2026-27 that change the answer

Three changes notified by CBDT on 30 March 2026 expand who can use these simpler forms. If you filed last year and jumped to ITR-2, check again — you may not need to this time.

1. Two house properties now allowed in both ITR-1 and ITR-4

Previously, owning a second house automatically pushed you to ITR-2. From AY 2026-27, you can report income (or loss) from up to two house properties in both ITR-1 and ITR-4. One condition remains: carried-forward losses from earlier years on house property cannot be reported in these simpler forms — that still needs ITR-2 or ITR-3.

2. Small equity investors can now stay in ITR-1

If you sold listed equity shares or equity mutual funds and your LTCG under Section 112A is ₹1.25 lakh or less — and you have no capital losses to carry forward — you can now report that in ITR-1 itself. Previously, any capital gain meant ITR-2. Note that STCG (taxed at 20% under Section 111A from Budget 2024 onwards) still disqualifies you from ITR-1.

3. ITR-4 due date moved to 31 August 2026

Finance Act 2026 permanently moved the ITR-4 (and ITR-3) non-audit deadline from 31 July to 31 August. This gives small business owners and freelancers an extra month to close their books. It is not a temporary extension — it is built into the law. ITR-1 filers still have 31 July as their deadline.

Presumptive taxation under ITR-4 explained simply

ITR-4 is built around one idea: instead of maintaining full books and getting them audited, the tax law presumes your profit is a fixed percentage of turnover. You pay tax on that presumed figure. No audit, no P&L statement, no depreciation calculations.

Three sections govern this, each with its own limits for AY 2026-27:

Source: incometax.gov.in, ITR-4 FAQ (Section 44AD, 44ADA, 44AE). Limits confirmed for AY 2026-27. [VERIFY: Section 44AE per-vehicle rates — confirm on incometax.gov.in before publishing.]

One critical lock-in rule applies to Section 44AD: once you opt in, you must continue for five consecutive assessment years. If you opt out before completing five years, you cannot re-enter the scheme for the next five years. Section 44ADA has no such restriction.

New for AY 2026-27: if you are filing ITR-4, you must now disclose the aggregate closing balance across all your active bank accounts as of 31 March 2026. This field is mandatory — not optional — in Schedule BP of the form.

Worked examples with real ₹ figures

Example 1 — Salaried employee with two flats and small SIP gains → ITR-1

Ramesh is a software engineer in Pune earning ₹14 lakh gross salary. He owns two flats: one self-occupied, one rented at ₹18,000/month (₹2.16 lakh/year). He also redeemed equity mutual fund units in December 2025 with LTCG of ₹90,000. His FD interest is ₹60,000.

Gross salary₹14,00,000

Rental income (after 30% standard deduction u/s 24)₹1,51,200

FD interest₹60,000

LTCG u/s 112A (below ₹1.25L threshold)₹90,000

Total income₹16,01,200

Verdict: ITR-1 (Sahaj). Total income is under ₹50 lakh. Two house properties are now allowed. LTCG is under ₹1.25 lakh and there are no capital losses. No business income. File by 31 July 2026.

Example 2 — Freelance graphic designer with all-digital receipts → ITR-4

Priya is a freelance designer in Mumbai. Her total billings for FY 2025-26 were ₹62 lakh, received entirely via bank transfer (100% digital). As a designer, she falls under the "specified professions" list in Section 44ADA.

• Gross professional receipts₹62,00,000

• Digital receipts ≥95%?Yes — limit is ₹75L ✓

• Presumed taxable income @ 50%₹31,00,000

• Standard deduction (new regime)N/A (not salaried)

• Taxable income under ITR-4₹31,00,000

Verdict: ITR-4 (Sugam). ₹62L is within the ₹75L limit (since ≥95% is digital). She declares ₹31L as profit — no books, no audit. She pays tax on ₹31L as per her applicable slab. File by 31 August 2026. No 5-year lock-in under 44ADA.

Example 3 — Small trader who must file ITR-3 (NOT ITR-4)

Suresh runs a hardware shop with turnover of ₹2.4 crore. Only 60% of his receipts are digital. He declared income at less than 8% in AY 2023-24, opting out of Section 44AD. Under the 5-year lock-in rule, he is barred from re-entering Section 44AD until AY 2028-29.

Verdict: ITR-3 — not ITR-4. Turnover exceeds ₹2 crore (the cash/mixed limit), and the 5-year lock-out bars re-entry to 44AD. He must maintain books and file ITR-3.

Deadlines, late fees, and what you lose by filing late

Finance Act 2026 introduced a staggered deadline structure for AY 2026-27. The "one deadline for all" approach is gone.

Filing late triggers three consequences. First, Section 234F imposes a penalty: ₹1,000 if your total income is ₹5 lakh or below, and ₹5,000 in all other cases. Second, Section 234A adds 1% simple interest per month (or part month) on any unpaid tax from the due date until you actually file. Third — and this is the one most people overlook — if you file a belated return, you are automatically locked into the new tax regime. You lose the right to opt for the old regime and claim deductions like 80C, 80D, and home loan interest under Section 24(b). [VERIFY: confirm via CBDT circular that belated return = mandatory new regime for AY 2026-27.]

Also: e-verify your return within 30 days of submission. An unverified return is treated as never filed, regardless of whether you submitted it before the deadline.

Old vs new tax regime — which to pick

The new tax regime is the default for AY 2026-27. You are taxed under it unless you actively opt out. Salaried individuals (ITR-1 filers) can switch between regimes every year directly in their ITR. Business and professional taxpayers (ITR-4 filers) must file Form 10-IEA before the due date to opt out — and this option is available only once in their lifetime.

Source: incometax.gov.in, Budget 2025 (Finance Act 2025). Budget 2026 kept slabs unchanged. Add 4% Health & Education cess on total tax.

Section 87A rebate: under the new regime, if your taxable income is ₹12 lakh or below, you pay zero tax — the rebate of up to ₹60,000 wipes out your liability entirely. Salaried filers also get a ₹75,000 standard deduction, making gross salary up to ₹12.75 lakh effectively tax-free under the new regime.

One important nuance: the 87A rebate does not apply to special-rate income. If you have LTCG from equity (Section 112A, taxed at 12.5%) or STCG from equity (Section 111A, taxed at 20%), those are taxed separately — even if your total income is under ₹12 lakh.

The old regime still makes sense if your total deductions are large: a home loan interest deduction of ₹2 lakh (Section 24b), ₹1.5 lakh under Section 80C, ₹25,000 under Section 80D, and HRA — that's ₹4.75+ lakh in deductions before you start. Run the numbers on Toolisky's calculator before deciding.

The edge case most articles miss

Salaried employee who ALSO has a freelance side income

Suppose Vikram earns ₹20 lakh salary and also consults on the side, billing ₹8 lakh for the year (all via bank transfer). Many people assume: "salary goes in ITR-1, freelance goes in ITR-4 — which one do I use?"

The answer is ITR-4. ITR-4 explicitly allows salary income alongside presumptive business or professional income. Total income is ₹28 lakh (₹20L salary + ₹4L presumed profit at 50% of ₹8L under 44ADA) — under the ₹50 lakh cap. He files ITR-4 by 31 August 2026.

What he cannot do is file ITR-1 and ignore the freelance income, or split it across two forms. One person files one ITR for the year.

Common misconception corrected

Misconception: "ITR-4 filers can only report one house property"

This was true before AY 2026-27. Several older articles and even some chartered accountant guides still say "ITR-4 restricts house property to one." This is now wrong.

From AY 2026-27, the official income tax portal's ITR-4 FAQ explicitly states: "You can disclose income from up to two house properties in ITR-4." A freelancer who owns a self-occupied flat and a rented second flat can now report both in ITR-4 — provided the other eligibility conditions are met and there are no carried-forward losses on the house property.

With real numbers: a doctor under Section 44ADA with ₹40L gross receipts, one self-occupied house, and a second house rented at ₹20,000/month (₹2.4L/year gross, ₹1.68L after standard deduction) — total income = ₹20L + ₹1.68L = ₹21.68L. Well under ₹50L. ITR-4. Not ITR-3.

What to do today — one action step

Most articles tell you which form to use. Here is what you actually do next: log in to incometax.gov.in, go to e-File → Income Tax Returns → File Income Tax Return, select AY 2026-27, and check the pre-filled AIS (Annual Information Statement). Verify that every TDS entry, dividend credit, bank interest, and any capital gain transaction the system has pre-filled matches your own records.

Specifically, look for Section 194 TDS entries that you did not expect — a second employer, a bank that deducted TDS on FD interest, or a mutual fund house that reported dividend income. These mismatches are the single biggest cause of defective return notices after filing.

Do this now, before you open the ITR form. It takes 15 minutes and it avoids a revised return later.

Ready to calculate your exact tax?

Get your exact figure in seconds — use our Income Tax Calculator on Toolisky. Compare old vs new regime, see your Section 87A rebate, and check whether ITR-1 or ITR-4 applies to your situation.

Use the Income Tax Calculator →

Frequently asked questions

Can I file ITR-1 if I have a second house that I've rented out?

Yes — from AY 2026-27 onwards. Previously a second house meant you had to switch to ITR-2. The CBDT notification of 30 March 2026 allows up to two house properties in ITR-1, provided your total income is under ₹50 lakh and you have no carried-forward house property losses from previous years. If you have such losses, you still need ITR-2.

I sold mutual fund units and made ₹80,000 profit. Do I still file ITR-1?

It depends on the type of gain. If this is LTCG from listed equity mutual funds under Section 112A, and you have no capital losses to carry forward, then yes — you can stay in ITR-1 as the ₹80,000 is under the ₹1.25 lakh threshold. If these are short-term capital gains (held less than 12 months for equity funds), then no — STCG disqualifies you from ITR-1, and you must file ITR-2.

What is the last date to file ITR-4 for AY 2026-27?

31 August 2026 for non-audit cases (most small business owners and freelancers filing under presumptive taxation). This is a new permanent deadline introduced by Finance Act 2026, extended from the earlier 31 July. If your accounts require a tax audit under Section 44AB, your deadline is 31 October 2026.

Can a freelance doctor with ₹60 lakh gross receipts file ITR-4?

Yes, provided at least 95% of those receipts are received through digital channels (UPI, bank transfer, account payee cheque). Under Section 44ADA, the limit is ₹75 lakh when the digital receipt condition is met. The doctor declares 50% of ₹60L = ₹30L as taxable income, pays tax on ₹30L at the applicable slab rate, and files ITR-4 by 31 August 2026. No books, no audit.

My salary is ₹12.75 lakh. Do I pay zero tax under the new regime?

Yes. Under the new regime, the ₹75,000 standard deduction brings your taxable income down to ₹12 lakh. The Section 87A rebate of up to ₹60,000 eliminates the tax liability entirely for taxable income at or below ₹12 lakh. Your final tax is zero — no cess either, since the base tax is nil. This applies only to regular slab-rate income, not to any special-rate income like capital gains.

What happens if I file ITR-1 but I was actually eligible only for ITR-2?

The Income Tax Department will issue a defective return notice under Section 139(9). You will be given an opportunity to correct the return within a specified period. Ignoring the notice means the return is treated as if never filed — triggering penalties and interest under Sections 234A and 234F. Filing the correct form from the start is always the better call.

I am a salaried employee who also does F&O trading. Which ITR do I file?

F&O (futures and options) income is treated as business income, not capital gains. This means you cannot use ITR-1 or ITR-4. You need ITR-3. Additionally, if your F&O turnover (which is calculated differently from regular business turnover) crosses ₹10 crore — or if you declare a loss — a tax audit under Section 44AB may apply.

Can an HUF file ITR-4?

Yes. ITR-4 is available to resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) who meet the presumptive taxation eligibility criteria. An HUF with business income under Section 44AD can file ITR-4. LLPs are specifically excluded and must use ITR-5.

Related tools and resources on Toolisky

[EDITOR NOTE: Sitemaps were unreachable during generation. Verify all URLs below exist on toolisky.com before publishing.]

Income Tax Calculator AY 2026-27

Calculate your tax liability under both old and new regime. Includes Section 87A rebate.

HRA Exemption Calculator

Find your exact HRA exemption under the old regime before deciding which ITR to file.

New vs Old Tax Regime — which saves more money?

Side-by-side comparison with worked examples across five income brackets.

Section 44AD Presumptive Taxation Guide

When to opt in, how the 5-year lock-in works, and who benefits most.

Advance Tax Calculator

Business taxpayers under 44AD must pay 100% advance tax by 15 March. Calculate yours here.

LTCG and STCG Tax Calculator AY 2026-27

Calculate capital gains tax at the new post-Budget 2024 rates of 12.5% and 20%.

Official sources and references

• Income Tax Department — ITR-4 (Sugam) Online Filing FAQ, AY 2026-27 — incometax.gov.in

• Income Tax Department — Salaried Individuals, AY 2026-27 — incometax.gov.in

• Income Tax Department — Income Tax Returns, general guidance AY 2026-27 — incometax.gov.in

• Income Tax Department — Business/Profession income, AY 2026-27 — incometax.gov.in

• CBDT — Notification of ITR forms for AY 2026-27 (30 March 2026) — cbdt.gov.in

This article is for educational purposes only. Consult a qualified CA or legal professional before making tax decisions. See /accuracy-and-limitations.