ITR-4 Gets Major Upgrade: Taxpayers Can Now Report Income From Two Properties in One Return

The Income Tax Department has introduced significant changes to the ITR-4 form for the Financial Year 2025-26 (Assessment Year 2026-27), offering greater flexibility and improved reporting options for eligible taxpayers. Among the most notable updates is the ability to declare income from two residential properties within a single ITR-4 filing, a feature that was previously unavailable.

In addition, a new provision has been added to help taxpayers report unrealized rent—rental income that was due but could not be collected from tenants. These changes are aimed at improving transparency and making the tax filing process more practical for property owners.

What Is ITR-4 and Who Can Use It?

ITR-4, commonly known as the Sugam Form, is designed for resident individuals, Hindu Undivided Families (HUFs), and certain partnership firms that opt for the presumptive taxation scheme.

The form can generally be used by taxpayers who:

• Have a total annual income of up to ₹50 lakh.

• Earn income from business or profession under presumptive taxation provisions.

• Receive income from salary or pension.

• Earn limited agricultural income.

• Have income from certain other eligible sources.

The form simplifies return filing for small business owners and professionals by allowing income declaration under presumptive taxation rules.

Taxpayers Can Now Report Two House Properties

One of the biggest changes introduced this year is the expansion of property reporting under ITR-4.

Earlier, taxpayers using ITR-4 could generally disclose income details relating to only one house property. Under the revised format, eligible taxpayers can now provide details of income earned from two residential properties within the same return.

The update is expected to benefit taxpayers who own multiple residential properties and previously faced limitations while filing returns under the simplified ITR-4 framework.

By allowing disclosure of income from two properties, the new form offers a more comprehensive representation of a taxpayer's actual financial position.

New Rules for Partly Self-Occupied and Partly Rented Properties

The revised guidelines also provide clarity for properties that are used partly by the owner and partly rented out.

Under the updated framework:

• The self-occupied portion will be treated according to the rules applicable to self-occupied residential property.

• The rented portion will be assessed separately under the rules governing rental income.

This distinction ensures that income calculations accurately reflect the actual usage of the property and help taxpayers report earnings correctly.

New Column Added for Unrealized Rent

Another important addition to ITR-4 is a dedicated reporting field for unrealized rent.

This provision is intended for landlords who were unable to recover the full rental amount from tenants during the financial year.

Previously, reporting such situations could be more complicated. The newly introduced column is expected to simplify disclosures and improve transparency in property-related income reporting.

Tax experts believe this change will help ensure that taxpayers are taxed based on actual income circumstances rather than assumptions that all rent due has been collected.

How Tax Will Apply if Unrealized Rent Is Recovered Later

The Income Tax Department has also clarified the treatment of unrealized rent that is recovered in a future year.

If rent that could not be collected earlier is received later, the amount will be taxed in the financial year in which it is actually received.

This rule applies even if the taxpayer no longer owns the property when the rent is eventually recovered.

However, taxpayers will continue to receive the benefit of the standard deduction available on such rental income before the taxable amount is calculated. After the deduction is applied, tax will be levied on the remaining amount.

Why These Changes Matter

The latest modifications reflect the government's broader effort to modernize tax compliance and improve reporting accuracy.

The benefits of the new provisions include:

• Easier reporting for taxpayers with multiple properties.

• Better disclosure of actual rental income.

• Improved transparency in tax filings.

• Reduced ambiguity regarding unrealized rent.

• Simplified compliance for eligible ITR-4 filers.

These updates may particularly benefit small business owners, professionals, and property owners who use the presumptive taxation scheme.

Key Things Taxpayers Should Keep in Mind

Tax professionals advise taxpayers to carefully review property-related disclosures before filing their returns. Details regarding ownership, rental receipts, self-occupied portions, and unrealized rent should be entered accurately.

Any mismatch between reported information and available records could lead to notices, verification requests, or future disputes.

As the filing season progresses, understanding these new ITR-4 provisions can help taxpayers submit accurate returns, claim eligible benefits, and avoid unnecessary complications with the Income Tax Department.