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The Income Tax Department has issued a very important update for taxpayers filing Income Tax Returns (ITR Filing 2026). The department has notified all types of ITR forms for Assessment Year (AY) 2026-27 (FY 2025-26). Along with this, Excel Utility for the most popular forms – ITR-1, ITR-2, ITR-3 and ITR-4 (Sugam) for self-employed and taxpayers associated with small businesses and professionals has also been made live on the official e-filing portal.
Last date for taxpayers to file their returns without any penalty 31 July 2026 It has been determined. This time, to promote transparent tax reporting, the department has made two very important and practical changes regarding rental income in ITR-4 form, which is important for every landlord to understand.
What are the 2 new changes in ITR-4 form?
If you earn rent from your property and are going to file ITR-4 form this year, you will notice these two major changes in the new format:
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Maximum limit of two house properties: Under the new rules, taxpayers will now be able to give detailed information about rental income from maximum two house properties (house or commercial property) in ITR-4 form. If there are more assets than this, the selection of the form may have to be changed.
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New column of Unrealized Rent: Many times it happens that the tenant vacates the house without paying the rent or the rent gets stuck due to a dispute. A completely new and separate column has been added in the form to provide details of ‘Rent which cannot be realised’, so that the taxpayers do not have to pay unnecessary tax on the stuck money.
Which taxpayers can file ITR-4 (Sugam) form?
ITR-4 form is not for everyone. This form is specifically designed for the following taxpayers:
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Eligibility: This form is for individual taxpayers, Hindu Undivided Families (HUF) and Partnership Firms (except LLP) whose total annual income is up to ₹50 lakh Is.
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Business and Professional Income: Whose main source of income comes under the Prescriptive Taxation Scheme under Section 44AD (Small Businessmen), 44ADA (Professionals like doctors, lawyers, engineers) or 44AE (Goods Carriage/Transport Business) of the Income Tax Act.
Living on your own in the same house and paying rent; How will the tax be levied?
The Income Tax Department has clarified that if there are two or more independent flats/units in the same house or building, and the landlord himself lives in one part of it while the other part is taken on rent, then both the parts will be treated as two separate properties for tax purposes:
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Self-contained part: The income of this unit will be assessed as per the rules for self-occupied property, the net annual value of which is considered to be zero.
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Rental Part: The income of this unit will be calculated as per the strict rules for let-out property and the rent received will be taxed as per the rules.
Mathematics of tax and 30% discount on receipt of rent arrears
Often this question arises in the minds of taxpayers that if the old stuck rent is recovered after years, then when and how will it be taxed? As per the new guidelines:
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Year of Acquisition: If the rent which was not recovered in the past and is suddenly received now, it will be considered as ‘Income from House Property’ in the same financial year in which the money actually comes into your hands.
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Bumper Discount of 30%: The most comforting thing is that before levying full tax on the old outstanding rent received in this way, the government Flat Standard Deduction of 30 percent That means direct tax exemption will be given.
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Law of Ownership: These tax rules and exemptions will be equally applicable even if you are no longer the legal owner of the property (ie you have sold the house) in the year of receipt of rent. The department believes that these new columns and rules will stop the trend of hiding rental income and honest taxpayers will get a better opportunity to express their views.