ITR-4 for Partnership Firm AY 2026-27: Complete Guide

A partnership firm can file ITR-4 for AY 2026-27 only when it satisfies the prescribed conditions for presumptive taxation, mainly under Section 44AD. A non-LLP partnership firm with turnover within the Section 44AD limit, income offered at the prescribed rate, and total income up to ₹50 lakh can generally use ITR-4 instead of ITR-5.

This guide explains ITR-4 filing for a partnership firm in AY 2026-27, eligibility, turnover limits, audit requirements, documents, due dates, online filing steps, and the difference between ITR-4 and ITR-5.

Can a Partnership Firm File ITR-4 for AY 2026-27?

Yes, a partnership firm can file ITR-4 if it is a resident firm other than an LLP and meets all conditions prescribed for ITR-4.

The firm must generally satisfy these conditions:

• It must be a resident partnership firm.
• It must not be an LLP. An LLP files its return in ITR-5.
• Its total income must not exceed ₹50 lakh.
• It must have income from an eligible business under Section 44AD or an eligible goods carriage business under Section 44AE.
• It must calculate business income on a presumptive basis.
• It must not have income or transactions that make it ineligible for ITR-4.
• It must not claim certain losses, deductions, or income categories that the ITR-4 form does not support.

The Income Tax Department provides the applicable return forms and filing utilities through its official e-filing portal.

Partnership Firm ITR-4 Eligibility AY 2026-27

Basic eligibility conditions

A partnership firm may use ITR-4 for AY 2026-27 when its income falls within the following framework:

Condition	Requirement
Type of entity	Resident partnership firm other than LLP
Main business income	Presumptive income under Section 44AD or 44AE
Maximum total income	₹50 lakh
House property income	Generally permitted, subject to the ITR-4 conditions
Other-source income	Generally permitted, subject to the ITR-4 conditions
Agricultural income	Up to ₹5,000
Tax regime	The firm is taxed under the provisions applicable to partnership firms

A firm should use ITR-5 instead if it does not meet these conditions.

When is a partnership firm not eligible for ITR-4?

A partnership firm generally cannot use ITR-4 in the following situations:

• It is an LLP.
• It has total income above ₹50 lakh.
• It has income from two or more house properties, where the form does not permit the reporting.
• It has income from specified capital gains or other sources that ITR-4 does not support.
• It has foreign assets, foreign income, or signing authority in a foreign account.
• It has carried-forward losses or losses to be carried forward that require detailed reporting.
• It has income taxable under special provisions that cannot be properly disclosed in ITR-4.
• It is required to report detailed accounts, depreciation, partner remuneration, or interest deductions.
• It has business income that is not eligible for presumptive taxation under the selected section.
• It has a claim that requires schedules available only in ITR-5.

The firm should not choose ITR-4 merely because its turnover is below ₹50 lakh. The nature of business and the method of calculating income are equally important.

Partnership Firm Presumptive Taxation Under Section 44AD AY 2026-27

Section 44AD allows eligible businesses to declare income at a prescribed percentage of turnover or gross receipts instead of calculating income after claiming actual business expenses.

According to the Income Tax Department’s Section 44AD provisions, the presumptive income is generally calculated as follows:

• 8% of turnover or gross receipts for receipts not covered by the lower digital-receipt rate.
• 6% of eligible turnover or gross receipts received through specified banking or electronic modes.

The 6% rate generally applies to receipts received through:

• Account-payee cheque or account-payee bank draft
• Electronic clearing system
• Prescribed electronic modes
• Other notified digital payment methods

Example of Section 44AD calculation

Assume a partnership firm has:

• Total turnover: ₹1,50,00,000
• Receipts through banking and electronic modes: ₹1,20,00,000
• Other receipts: ₹30,00,000

The presumptive income would be:

• 6% of ₹1,20,00,000 = ₹7,20,000
• 8% of ₹30,00,000 = ₹2,40,000
• Total presumptive business income = ₹9,60,000

The firm generally cannot claim separate deductions for rent, salaries, depreciation, electricity, interest, or other business expenses against this presumptive income.

Businesses excluded from Section 44AD

Section 44AD does not apply to every business. It generally excludes:

• A person carrying on a profession referred to in Section 44AA(1)
• Commission or brokerage income
• Agency business
• Certain businesses involving goods carriages covered by Section 44AE
• Businesses earning income in the nature of commission or brokerage

A partnership firm carrying on a professional activity may need to examine the requirements of Section 44ADA. However, Section 44ADA is generally meant for resident individuals and partnership firms engaged in specified professions, not LLPs, and the ITR form eligibility must be checked carefully for the relevant income type. A firm should not select Section 44AD if its business is actually a specified profession.

Partnership Firm Turnover Limit for ITR-4 Under Section 44AD

The Section 44AD turnover limit is generally:

• ₹2 crore, where cash receipts exceed the prescribed percentage of total gross receipts or turnover.
• ₹3 crore, where cash receipts do not exceed 5% of total gross receipts or turnover.

The ₹3 crore limit applies where the cash-receipt condition is satisfied. For this purpose, non-account-payee cheque or draft receipts may also be treated as cash receipts under the applicable rules.

Important distinction: ₹50 lakh versus ₹3 crore

The following two limits serve different purposes:

• ₹3 crore or ₹2 crore: The turnover limit for choosing presumptive taxation under Section 44AD.
• ₹50 lakh: The total-income limit for using ITR-4.

For example, a firm may have turnover of ₹2 crore and be eligible for Section 44AD, but if its total income after permitted adjustments exceeds ₹50 lakh, it may not be able to file ITR-4.

ITR-4 Audit Applicability for Partnership Firm AY 2026-27

A partnership firm filing presumptive income under Section 44AD is generally not required to maintain detailed books or undergo tax audit if it satisfies the presumptive taxation conditions.

However, tax audit may become relevant in these situations:

• Turnover exceeds the applicable Section 44AD limit.
• The firm declares income lower than the prescribed presumptive percentage and its total income exceeds the basic exemption threshold applicable for audit provisions.
• The firm is otherwise covered by Section 44AB.
• The business falls outside Section 44AD.
• The firm has selected a method of taxation requiring maintenance of books and audit.

Under the tax audit provisions of Section 44AB, the general business turnover threshold is ₹1 crore. This threshold can increase to ₹10 crore where cash receipts and cash payments do not exceed the prescribed 5% condition.

The Section 44AB audit threshold and the Section 44AD presumptive taxation threshold are not identical. A firm should examine both provisions before deciding whether an audit is required.

Audit example

Suppose a partnership firm has turnover of ₹2,50,00,000 and receives almost all its turnover through banking channels. It may fall within the ₹3 crore Section 44AD limit and may choose presumptive taxation.

If the firm declares income at or above the prescribed presumptive rate and satisfies the other conditions, tax audit may not be required. If it declares substantially lower income, audit requirements may apply depending on its total income and other facts.

Partnership Firm Income Tax Return Due Date AY 2026-27

The usual due dates for AY 2026-27 are:

Return category	Usual due date
Partnership firm not liable to tax audit	31 July 2026
Partnership firm liable to tax audit	31 October 2026
Transfer-pricing cases	30 November 2026

These dates relate to FY 2025-26 income and AY 2026-27 returns. CBDT may extend a due date through a notification or circular, so firms should check the latest CBDT notifications and circulars before filing.

A firm that misses the due date may face:

• Late filing fee under Section 234F
• Interest under Section 234A, 234B, or 234C, where applicable
• Restrictions on carrying forward certain losses
• Delays in processing refunds

The firm should also pay advance tax in accordance with the applicable instalments. A taxpayer using presumptive taxation under Section 44AD can generally pay the full advance tax by 15 March of the relevant financial year.

Documents Required for Partnership Firm ITR-4 Filing

The firm should keep the following information and documents ready:

Basic firm details

• PAN of the partnership firm
• Firm name and registered address
• Date of formation
• Nature of business
• Partnership deed
• Details of partners
• Profit-sharing ratio
• Details of the managing or authorised partner
• Bank account details

Turnover and presumptive income details

• Total turnover or gross receipts
• Receipts received through banking and electronic modes
• Cash receipts
• Details of eligible Section 44AD business
• Presumptive income calculation
• GST turnover reconciliation, where applicable
• Details of turnover reported in GST returns

Tax and financial information

• Form 26AS
• Annual Information Statement, or AIS
• Taxpayer Information Summary, or TIS
• TDS and TCS certificates
• Advance tax and self-assessment tax challans
• Details of refund bank account
• Details of any tax demand or previous return

The firm does not usually need to attach these documents to the income tax return. It must retain them and produce them if the Income Tax Department requests verification.

How to File ITR-4 for Partnership Firm Online

Follow these steps for how to file ITR-4 for a partnership firm online:

Step 1: Confirm eligibility

Check whether the firm:

• Is a resident non-LLP partnership firm
• Has eligible presumptive business income
• Falls within the ₹50 lakh total-income limit
• Does not have disqualifying income or transactions
• Does not need detailed schedules available in ITR-5

Step 2: Reconcile turnover

Reconcile the turnover in:

• Books or sales records
• GST returns
• Bank statements
• TDS certificates
• Form 26AS
• AIS and TIS

Any mismatch should be investigated before filing.

Step 3: Calculate presumptive income

Calculate 6% or 8% income, as applicable, on the eligible receipts. Do not reduce the result by separately claiming normal business expenses.

Step 4: Log in to the e-filing portal

Use the partnership firm’s PAN and registered login credentials on the Income Tax e-Filing portal.

Select:

1. Income Tax Return
2. Assessment Year 2026-27
3. Online or offline filing mode
4. Status as firm
5. ITR-4, if the system confirms eligibility

Step 5: Complete the return schedules

Enter:

• Firm and partner details
• Business activity
• Turnover and presumptive income
• Income from house property, if applicable
• Other sources of income
• TDS, TCS, advance tax, and self-assessment tax
• Bank account details
• Tax payable or refund details

Step 6: Validate and submit

Use the validation function to identify errors. The firm should verify that the partner details, profit-sharing information, turnover, tax credits, and bank account details are accurate.

Step 7: Verify the return

The return must be verified by the managing partner or, where permitted, another authorised partner. The firm can use the available electronic verification method or digital signature method applicable to its filing circumstances.

If tax remains payable, pay self-assessment tax before submitting the final return.

Tax Treatment of a Partnership Firm for AY 2026-27

A partnership firm is generally taxed at a flat rate of 30%, plus applicable surcharge and health and education cess. A surcharge may apply when total income exceeds the relevant threshold.

The firm should also consider:

• Interest paid to partners
• Remuneration paid to working partners
• Restrictions under Section 40(b)
• TDS obligations
• Advance tax
• GST reconciliation
• Tax deducted from payments received

When the firm uses presumptive taxation under Section 44AD, it generally cannot separately deduct partner salary, partner interest, depreciation, or other operating expenses from the presumptive income.

A partner’s share of profit from a firm is generally exempt under Section 10(2A), while remuneration and interest received by the partner may be taxable in the partner’s individual return, subject to the applicable provisions.

Difference Between ITR-4 and ITR-5 for Partnership Firm

Point	ITR-4	ITR-5
Eligible firm	Resident non-LLP partnership firm meeting ITR-4 conditions	Partnership firms, LLPs, AOPs, BOIs and other specified entities
Income method	Mainly presumptive taxation	Presumptive or detailed computation, as applicable
Total-income limit	Generally ₹50 lakh	No ITR-4-style ₹50 lakh restriction
Detailed financial reporting	Limited	More comprehensive
Complex income	Generally not suitable	Suitable for complex income and transactions
Brought-forward losses	Restricted	Detailed reporting available
Foreign assets or income	Generally not suitable	Appropriate schedules available
LLP filing	Not permitted	Required
Partner remuneration and interest reporting	Limited in presumptive return	Detailed reporting available

Which form should a firm choose?

Use ITR-4 when the firm has simple eligible presumptive income and meets all conditions.

Use ITR-5 when the firm:

• Has detailed accounts
• Claims actual expenses
• Declares income under normal provisions
• Has carried-forward losses
• Has complex income
• Is an LLP
• Has income or assets requiring schedules not available in ITR-4
• Needs to report partner remuneration or interest in detail

Choosing the wrong form can lead to defective-return notices or the need to file a revised return.

Common Mistakes in ITR-4 Filing by Partnership Firms

Avoid these errors during filing:

• Selecting ITR-4 solely because turnover is below ₹50 lakh
• Treating an LLP as eligible for ITR-4
• Applying 6% to all receipts without checking payment modes
• Claiming rent, salaries, depreciation, or partner remuneration separately under Section 44AD
• Reporting turnover differently in GST returns and the income tax return without reconciliation
• Ignoring TDS reflected in Form 26AS or AIS
• Failing to report interest income or other-source income
• Using the wrong partner or authorised signatory details
• Filing ITR-4 despite having income that requires ITR-5
• Not verifying the return after submission
• Filing without paying self-assessment tax
• Ignoring tax audit requirements when declaring income below the presumptive rate

Practical Filing Example

M/s Rohan and Neha Traders is a resident partnership firm engaged in wholesale trading. Its turnover for FY 2025-26 is ₹1,80,00,000. The firm receives 96% of its receipts through banking channels and 4% in cash.

The firm may be able to use Section 44AD because:

• It is a non-LLP partnership firm.
• Its turnover is below ₹3 crore.
• Cash receipts do not exceed 5% of total receipts.
• Its business is eligible for presumptive taxation.

If the firm has no disqualifying income and total income remains within ₹50 lakh, it may file ITR-4 and calculate presumptive income at the applicable 6% and 8% rates based on the nature of receipts.

If the firm instead wants to claim actual expenses and report partner remuneration separately, it may need to file ITR-5 and comply with the applicable books and audit provisions.

Summary

Filing of ITR-4 for a partnership firm in AY 26-27 is possible, but only for an eligible resident non-LLP firm using presumptive taxation and satisfying the ₹50 lakh total-income and other form conditions. The Section 44AD turnover limit is generally ₹2 crore, increasing to ₹3 crore when the cash-receipt condition is satisfied.

Before filing, reconcile turnover with GST records, verify TDS and AIS information, calculate 6% or 8% presumptive income correctly, and confirm whether audit provisions apply. If the firm has complex income, actual expense claims, an LLP structure, or detailed partner-related reporting, ITR-5 is generally more appropriate than ITR-4 for partnership firm AY 2026-27.