ITR-4 or ITR-5 for Partnership Firms AY 2026-27

Choosing the correct return is the first step in partnership firm income tax return filing for AY 2026-27. A resident partnership firm, other than a Limited Liability Partnership (LLP), may use ITR-4 only when it satisfies the presumptive taxation and income limits. In all other cases, the firm must file ITR-5. An LLP cannot file ITR-4 and must generally use ITR-5.

For AY 2026-27, the relevant financial year is FY 2025-26, which ended on 31 March 2026.

ITR-4 or ITR-5 for Partnership Firms AY 2026-27: Quick Answer

A partnership firm can file ITR-4 if all of the following conditions apply:

• It is a resident partnership firm.
• It is not an LLP.
• Its total income does not exceed ₹50,00,000.
• It declares business income under Section 44AD.
• It does not have income or circumstances that make ITR-4 inapplicable.
• It satisfies the other conditions prescribed in the ITR-4 instructions.

A partnership firm must file ITR-5 if:

• Its total income exceeds ₹50,00,000.
• It does not use presumptive taxation under Section 44AD.
• It has income from capital gains, more than one house property, foreign assets or income, or other income not permitted in ITR-4.
• It claims deductions or reports transactions that cannot be disclosed in ITR-4.
• It is an LLP.
• It is subject to tax audit and the details cannot be adequately reported in ITR-4.

The final decision depends on the firm’s constitution, income sources, turnover, accounting method and tax audit position. The Income Tax Department provides the applicable return forms and instructions through its official income tax e-filing portal.

Eligibility for ITR-4 by Partnership Firm AY 2026-27

When can a partnership firm use ITR-4?

ITR-4, also known as Sugam, is a simplified return form. A partnership firm can use it only where its business income falls under the presumptive provisions of Section 44AD.

For AY 2026-27, the firm’s presumptive business income is generally calculated as:

• 8% of eligible turnover or gross receipts, or
• 6% of eligible turnover or gross receipts received through specified banking or electronic modes, or
• A higher amount voluntarily declared by the firm.

The enhanced turnover limit under Section 44AD is ₹3,00,00,000, provided cash receipts do not exceed 5% of total turnover or gross receipts. Otherwise, the general turnover limit is ₹2,00,00,000.

The firm must also satisfy the ₹50,00,000 total income limit applicable to ITR-4. This limit is based on total income before certain deductions, as specified in the return form instructions.

Businesses generally not eligible for ITR-4

A firm cannot use ITR-4 for business income under Section 44AD if it carries on:

• A profession covered by Section 44AA(1), such as legal, medical, architectural, accountancy, technical consultancy or similar specified professions.
• An agency business.
• A business earning income in the nature of commission or brokerage.
• A business involving the plying, hiring or leasing of goods carriages covered by Section 44AE.
• A business or income source that falls outside the permitted ITR-4 categories.

A partnership firm conducting professional services may need to use ITR-5 and consider tax audit under Section 44AB.

Can an LLP file ITR-4?

No. An LLP is not eligible to file ITR-4. It must file ITR-5, even if it declares income under a presumptive provision where applicable.

This distinction is important because many businesses use the word “partnership” informally. The firm’s legal constitution in its PAN and registration records must be checked before selecting the form.

When Is ITR-5 Mandatory for a Partnership Firm?

ITR-5 is the standard return form for partnership firms that do not qualify for ITR-4. It applies to ordinary partnership firms, LLPs and certain other entities.

A partnership firm should select ITR-5 in the following situations:

1. The firm maintains regular books of account and declares actual profit.
2. Total income exceeds ₹50,00,000.
3. The firm has income from capital gains.
4. The firm owns more than one house property.
5. The firm has foreign assets, foreign income or specified international transactions.
6. The firm claims business expenses and deductions based on actual accounts.
7. The firm is subject to tax audit under Section 44AB.
8. The firm has discontinued presumptive taxation and is reporting income under normal provisions.
9. The firm has income that the ITR-4 form does not permit it to report.

Therefore, the phrase ITR-4 or ITR-5 for partnership firms AY 2026-27 does not mean that every firm can choose either form freely. ITR-4 is available only when the firm meets its eligibility conditions.

Presumptive Taxation for Partnership Firms Under Section 44AD AY 2026-27

Section 44AD allows an eligible partnership firm to calculate business income without maintaining detailed books for every expense. The firm declares a fixed percentage of turnover as taxable profit.

Example of Section 44AD calculation

Assume a resident partnership firm has:

• Total turnover: ₹1,50,00,000
• Digital receipts: ₹1,20,00,000
• Other eligible receipts: ₹30,00,000

The presumptive income may be calculated as follows:

Particulars	Calculation	Presumptive income
Digital receipts	₹1,20,00,000 × 6%	₹7,20,000
Other receipts	₹30,00,000 × 8%	₹2,40,000
Total business income		₹9,60,000

The firm cannot separately deduct rent, salaries, depreciation, interest on borrowings or other business expenses from this presumptive income. Depreciation is treated as having been allowed for the purposes of the Act.

However, eligible interest to partners and remuneration to working partners may be considered separately under Section 40(b), subject to the statutory limits and the conditions of the partnership deed. The firm must not assume that presumptive taxation permits unrestricted deduction of partner payments.

Five-year consequence of leaving Section 44AD

If an eligible firm declares profit under Section 44AD and later declares income not in accordance with the presumptive scheme within the specified five-year period, the restrictions under Section 44AD may apply. The firm may also become liable to maintain books and obtain a tax audit report if its total income exceeds the basic exemption threshold applicable to the audit provision.

The firm should review its position for the entire five-year period before switching between presumptive and regular taxation.

Income Tax Calculation for Partnership Firm AY 2026-27

A partnership firm is generally taxed at a flat rate of 30% on taxable income. The firm does not use the individual slab rates applicable to partners.

The following may also apply:

• Surcharge of 12% where total income exceeds ₹1,00,00,000.
• Health and Education Cess of 4% on income tax plus surcharge.
• Alternate Minimum Tax (AMT) in applicable cases, generally at 18.5% of adjusted total income, subject to the provisions of the Income Tax Act.

Example of tax calculation

Suppose a partnership firm has taxable income of ₹10,00,000 for AY 2026-27:

• Income tax at 30%: ₹3,00,000
• Health and Education Cess at 4%: ₹12,000
• Total tax payable: ₹3,12,000

This example excludes advance tax, tax deducted at source, tax collected at source, interest and other adjustments.

A partnership firm generally cannot claim the individual taxpayer rebate under Section 87A. The firm should calculate tax using the provisions applicable to firms and verify its liability after considering TDS, advance tax and eligible deductions.

Partner Remuneration and Interest: What the Firm Should Check

Partner payments frequently create errors in partnership firm tax return filing for AY 2026-27.

Interest to partners

Interest paid or payable to partners is deductible only within the limits of Section 40(b). The usual maximum permissible rate is 12% simple interest per annum, subject to the statutory conditions.

The partnership deed should:

• Authorise payment of interest.
• Specify the rate or method of calculation.
• Clearly identify the partners and their profit-sharing arrangement.
• Be effective for the relevant period.

Remuneration to working partners

Remuneration is deductible only when paid to working partners and authorised by the partnership deed. The deduction is subject to the prescribed limit based on book profit.

The firm should reconcile:

• Remuneration debited in the profit and loss account.
• Remuneration allowed under Section 40(b).
• Remuneration disclosed in the partners’ individual returns.
• TDS requirements, wherever applicable.

A payment that is allowable to the firm is generally taxable in the hands of the partner under the applicable provisions. The firm and partners should use consistent figures in their respective returns.

Partnership Firm Tax Audit Due Date AY 2026-27

A firm may need a tax audit under Section 44AB if its business turnover crosses the applicable threshold or if another audit condition applies.

For a business, the usual turnover threshold is:

• More than ₹1,00,00,000, or
• More than ₹10,00,00,000 where cash receipts and cash payments do not exceed the prescribed 5% conditions.

The ₹10 crore threshold is not automatically available merely because the firm receives most payments through banks. The cash receipt and cash payment conditions must be examined separately.

Important due dates for AY 2026-27

Compliance	Statutory due date
ITR-4 or ITR-5 where tax audit is not applicable	31 July 2026
Tax audit report under Section 44AB	30 September 2026
ITR-5 where tax audit is applicable	31 October 2026
Return for specified transfer-pricing cases	30 November 2026
Revised return under the normal revision window	31 December 2026

The due dates above are the prescribed dates under the normal statutory calendar. The firm should verify any extension notified by the Central Board of Direct Taxes on the CBDT website or the income tax e-filing portal.

For a firm with an international transaction or specified domestic transaction requiring a transfer pricing report, the applicable return and report deadlines may differ.

ITR-5 Filing Due Date for Partnership Firm AY 2026-27

The ITR-5 filing due date for a partnership firm AY 2026-27 depends on whether the firm requires a tax audit.

If tax audit is not applicable

The due date is generally 31 July 2026. The firm should complete the return, pay self-assessment tax and verify the return by the prescribed process.

If tax audit is applicable

The tax audit report is generally due by 30 September 2026, and the ITR-5 is generally due by 31 October 2026.

The audit report and return should contain matching information on:

• Turnover and gross receipts.
• Profit before tax.
• Depreciation.
• Partner remuneration and interest.
• TDS and TCS.
• GST turnover, where relevant.
• Loans, deposits and specified cash transactions.
• Outstanding statutory liabilities.

Late filing can affect the ability to carry forward certain losses and may result in interest or late filing fees under the Income Tax Act.

Documents Required for Partnership Firm ITR Filing AY 2026-27

The firm should gather the following records before starting the return:

Basic entity documents

• PAN of the partnership firm.
• Partnership deed and supplementary deeds.
• Registration details, if the firm is registered.
• Address and contact details.
• Bank account details and a pre-validated bank account.
• Details of all partners and their profit-sharing ratios.
• Digital Signature Certificate of the managing partner or authorised partner.

Financial records

• Profit and loss account.
• Balance sheet.
• Trial balance.
• Cash book and ledger.
• Fixed asset register.
• Details of depreciation.
• Details of loans, advances and capital accounts.
• Details of partner interest and remuneration.
• GST returns and reconciliation with turnover.
• Sales, purchase and expense summaries.

Tax records

• Form 26AS.
• Annual Information Statement.
• Tax Information Summary.
• TDS and TCS certificates.
• Advance tax challans.
• Self-assessment tax challans.
• Details of tax audit report in Form 3CA or Form 3CB and Form 3CD, where applicable.
• Details of carried-forward losses and unabsorbed depreciation.
• Details of deductions and exempt income.

The firm should reconcile its books with the Annual Information Statement provided by the Income Tax Department, especially interest income, high-value transactions, TDS and GST-linked information.

How to File ITR-4 or ITR-5 for a Partnership Firm

Follow these steps for a systematic filing process:

1. Confirm the legal status of the entity as a firm or LLP.
2. Determine residential status for FY 2025-26.
3. Calculate turnover and cash receipts to test Section 44AD and Section 44AB.
4. Select ITR-4 or ITR-5 based on eligibility.
5. Prepare the accounts and reconcile them with GST returns and bank statements.
6. Calculate partner interest and remuneration under Section 40(b).
7. Prepare the tax audit report, if applicable.
8. Enter TDS, TCS, advance tax and self-assessment tax details.
9. Submit the return using the firm’s registered account.
10. Verify the return using the required digital signature of the managing partner or authorised partner.

A partnership firm should not file ITR-4 simply because its income is below ₹50,00,000. The nature of business and other income conditions must also be satisfied.

Revised ITR-5 Filing for Partnership Firm AY 2026-27

A firm can file a revised ITR-5 for AY 2026-27 when it discovers an omission or an incorrect statement in the original return. Common reasons include:

• Incorrect turnover or presumptive income.
• Omitted bank interest or other income.
• Incorrect TDS credit.
• Wrong partner remuneration or interest.
• Incorrect depreciation.
• Incorrect tax audit details.
• A mismatch between the return and Form 26AS or AIS.

The normal revised return deadline is generally 31 December 2026, or before completion of assessment, whichever is earlier, subject to the law and any notified changes.

The revised return should correct the entire return, not only the field containing the error. The firm should retain the original acknowledgement number and compare the revised computation with the original filing.

Common Questions About Partnership Firm Returns

Can a partnership firm file ITR-4 without a tax audit?

Yes, if it satisfies all ITR-4 conditions and its income is eligible for Section 44AD. However, the absence of a tax audit alone does not make a firm eligible for ITR-4.

Can a partnership firm declare actual profit in ITR-4?

ITR-4 is designed for eligible presumptive income. A firm declaring regular business income after claiming actual expenses should generally use ITR-5.

Can a firm with turnover of ₹3,00,00,000 use Section 44AD?

It may be eligible where cash receipts do not exceed 5% of total turnover or gross receipts and the other Section 44AD conditions are met. The firm must also check the ITR-4 total income limit and other restrictions.

Is ITR-5 compulsory for an LLP?

Yes. An LLP cannot use ITR-4 and must generally file ITR-5.

Is tax audit required if the firm declares 8% profit?

Not necessarily. The firm must examine turnover, cash receipts, the Section 44AD conditions and the consequences of opting out of presumptive taxation. A firm that declares a lower profit may trigger audit requirements where its total income exceeds the applicable threshold.

Must a partnership firm file a return even if it has a loss?

Yes. A firm is generally required to file its income tax return regardless of whether it has taxable income or a loss. Timely filing is particularly important when the firm wants to carry forward eligible losses.

Final Checklist Before Filing

Before submitting the ITR-4 or ITR-5 for partnership firms AY 2026-27, confirm that:

• The correct return form has been selected.
• The firm’s PAN and bank details are accurate.
• Turnover agrees with books, GST records and the tax audit report.
• Digital and non-digital receipts have been classified correctly.
• Partner remuneration and interest comply with Section 40(b).
• TDS and advance tax credits match Form 26AS and AIS.
• Tax audit details have been filed, where applicable.
• The return has been verified by the authorised partner.
• The acknowledgement has been downloaded and retained.

In short, ITR-4 is available to an eligible resident partnership firm using Section 44AD with total income within the prescribed limit, while ITR-5 applies to other firms and all LLPs. Complete the partnership firm income tax return filing for AY 2026-27 on time, track the partnership firm tax audit due date AY 2026-27, and file a revised ITR-5 for partnership firm AY 2026-27 if an error is identified before the statutory deadline.