🧾 Introduction
The Income Tax Department is refreshing return forms every FYyear to align with changing economic activity and taxpayer behavior. For Assessment Year 2025–26, the ITR-4 form, which is typically used by small enterprises, freelancers, and professionals availing presumptive taxation has seen some Important changes
These changes are applicable to startup founders, ecommerce sellers, freelancers, consultants, and small businesses reporting under Sections 44AD, 44ADA, or 44AE. If you are looking for the best CA for freelancers and professionals or a CA near me for tax filing, it is necessary that you remain updated so that you file correctly and within time.
Let us have a look at these changes in detail and know how they affect you.
🆕 Major Updates in ITR-4 for AY 2025–26
🔹 1. LTCG Reporting Under Section 112A
One of the major changes is the addition of a provision for reporting long-term capital gains (LTCG) under Section 112A. Taxpayers now have the option to report LTCG up to ₹1.25 lakh in the ITR-4 form itself. Earlier, even minor gains used to result in a move to ITR-2.
For example, Rohan Mehta, a startup entrepreneur providing web development services under Section 44ADA, received ₹22 lakh and also realized a ₹90,000 profit from equity mutual funds. Due to the new ITR-4 changes, he can now include both these incomes in a single return without switching to ITR-2—saving time and compliance simplicity.
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🔹 2. Auto Validation Based on TDS Codes
ITR-4 now employs in-built logic to auto-reject taxpayers on the basis of certain TDS deductions incurred in Form 26AS.
Suppose Shruti Jain, a dropshipper and a cryptocurrency trader too, had TDS deducted under Section 194S (on virtual digital assets). When she attempted to file ITR-4, the system rejected her return and took her to ITR-3, which is more appropriate for such transactions. This automated verification prevents returns from being filed under the incorrect form, thereby avoiding faulty return notices.
🔹 3. Mandatory Tax Regime Declaration
The government has set the new tax regime (Section 115BAC) as the default. So if you’re filing under the old regime (you’re claiming deductions such as HRA, 80C, 80D), you’ll have to manually opt-out in the return.
Take the case of Priya Sharma, a freelance designer who earns ₹18 lakh a year under 44ADA. She has life insurance, medical insurance, and HRA allowances. Her CA had suggested that she remain under the old regime. But this time, she had to explicitly choose it in ITR-4—otherwise, the system would have defaulted her to the new regime with no allowance.
This shift is especially relevant for professionals, which makes it crucial to approach the best CA for professionals and freelancers to not miss out on tax-saving benefits.
🔹 4. Detailed Business Turnover Reporting
The ITR-4 form now demands more details about:
• GST registration
• Nature of business code
• Presumptive percentage used
• Methods of payment: cash, cheque, UPI, or bank transfer
Let us consider Akash Singh, a freelance content writer. His annual income is ₹12 lakh and most of the payments he gets come through UPI. This year, his CA had to split his receipts on the basis of payment mode so that he could properly report them in the return.
This feature enables the government to have a clearer picture of cash versus digital business activities, particularly in industries such as ecommerce, content, or small-scale consultancy.
🔹 5. Smart Prefill & Validation Features
New ITR-4 also has enhanced data pre-fill from:
• Form 26AS
• AIS (Annual Information Statement)
• PAN-Aadhaar linkage
• Bank interest information
Less manual input, but a greater onus of checking pre-filled information. Even a small discrepancy can result in return rejection.
💡 Pro Tip: Although prefill saves time, always get a CA for ecommerce business or startup filings check your data prior to filing.
❓ FAQs – Your Questions Answered
Q1. I have income from freelancing under Section 44ADA and certain capital gains on mutual funds. Can I file ITR-4?
Yes, provided that your LTCG is below ₹1.25 lakh and you satisfy all other requirements, you can file ITR-4.
Q2. What happens if I filed ITR-4 but had TDS under Section 194S?
The system will automatically detect this, and you will be asked to file using ITR-3. Filing in the incorrect form could lead to a defective return notice.
Q3. Is switching between tax regimes allowed every year?
Yes, individuals can opt in or out every year unless you have business income. If you’re a business taxpayer, Form 10-IEA must be submitted before due date to change regimes.
Q4. Do I require a CA to submit ITR-4?
If your income is simple, you can submit it directly. But for proper planning, correct regime selection, and turnover reporting, it’s always advisable to take the help of a high rated CA firm or the best CA for professionals and freelancers.
📝 Conclusion
The ITR-4 form has changed, and with it, the way professionals, startups, and small business folks file their returns. The likes of LTCG reporting, auto-validation, and mandatory regime selection make it necessary for you to be more cautious than ever.
Whether you are a freelancer, startup entrepreneur, ecommerce seller, or small business owner, don’t take chances with your compliance. Leave it to My Dream Consultant, your go-to CA for ecommerce business and freelancers, to file correctly and intelligently.
📞 Call My Dream Consultant
Phone: 8824045568
Website: www.mydreamconsultant.com
Reach Out: Find a CA near me for tax filing and ensure you’re always a step ahead in compliance!
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