Expert Assistance

ITR-4 (Sugam) is a simplified Income Tax Return form for Resident Individuals, Hindu Undivided Families (HUFs), and Firms (other than Limited Liability Partnerships or LLPs) whose total income does not exceed ₹50 Lakh during the financial year and who have income from business or profession computed under the Presumptive Taxation Scheme.

It is designed to be an easy-to-use form, streamlining the compliance process for small taxpayers.

 

Why is ITR-4 Filing Necessary?

Filing ITR-4 is mandatory for an eligible taxpayer to declare their income, compute their tax liability, and meet the statutory compliance requirements of the Income Tax Act.

The primary benefit and reason for choosing ITR-4 is the simplified calculation of tax liability through the Presumptive Taxation Scheme.

 

What is Presumptive Taxation?

The presumptive taxation scheme allows eligible small taxpayers to declare their income at a fixed percentage of their turnover or gross receipts, instead of having to maintain detailed books of accounts and calculate profit/loss by deducting every single expense.

This scheme offers significant benefits:

• Reduced Compliance Burden: It eliminates the need to maintain detailed books of accounts (like ledgers, journals, etc.) as required by Section 44AA.

• Exemption from Audit: Taxpayers who opt for this scheme are generally exempt from the requirement of a compulsory tax audit under Section 44AB.

• Simpler Filing: The ITR-4 form itself is simpler and shorter than ITR-3, which is for non-presumptive business/professional income.

 

Applicable Presumptive Sections:

The ITR-4 is used by those who declare income under the following sections:

1. Section 44AD (For Small Businesses):

   • Applicable to: Resident individuals, HUFs, and Partnership Firms (other than LLP) engaged in any business (excluding plying, hiring, or leasing goods carriages).

   • Eligibility Limit: Turnover or gross receipts must not exceed ₹2 Crore (this limit is extended to ₹3 Crore if the aggregate of amounts received in cash does not exceed 5% of the total turnover).

   • Deemed Profit Rate: The minimum profit deemed to be taxable income is:

     • 8% of the total turnover/gross receipts.

     • 6% of the turnover/gross receipts received through digital modes (account payee cheque/draft, ECS, or other prescribed electronic means).

2. Section 44ADA (For Professionals):

   • Applicable to: Resident individuals and Partnership Firms (other than LLP) engaged in specified professions (like legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, etc.).

   • Eligibility Limit: Gross receipts must not exceed ₹50 Lakh (this limit is extended to ₹75 Lakh if the aggregate of amounts received in cash does not exceed 5% of the total gross receipts).

   • Deemed Profit Rate: The minimum profit deemed to be taxable income is 50% of the total gross receipts.

3. Section 44AE (For Transporters):

   • Applicable to: Taxpayers engaged in the business of plying, hiring, or leasing goods carriages and who do not own more than 10 goods vehicles at any time during the financial year.

   • Deemed Profit Rate: A fixed presumptive income per vehicle, calculated on the basis of its tonnage/weight or a fixed monthly rate.

 

Who is Eligible to File ITR-4?

A Resident Individual, HUF, or Firm (other than LLP) can file ITR-4 if their total income is up to ₹50 Lakh and comprises of:

• Income from Business under the presumptive scheme of Section 44AD or Section 44AE.

• Income from Profession under the presumptive scheme of Section 44ADA.

• Income from Salary/Pension.

• Income from One House Property (excluding cases of brought forward loss).

• Income from Other Sources (e.g., interest, dividend, family pension, excluding income from lottery, racehorses, or special rate incomes).

• Agricultural Income up to ₹5,000.

 

Who is NOT Eligible to File ITR-4?

You must not file ITR-4 if you are:

• A Non-Resident or Resident Not Ordinarily Resident (RNOR).

• A taxpayer whose total income exceeds ₹50 Lakh.

• A Director in a Company.

• Holding any unlisted equity shares at any time during the previous year.

• Having income from Capital Gains (Short-Term or Long-Term).

• Having income from more than one House Property.

• Having income from sources like lottery, gambling, or owning and maintaining racehorses.

• Having foreign assets or foreign income.

• Having any brought forward loss or loss to be carried forward under any head of income.

 

 ITR-4 Filing Process: Step-by-Step

The most common method is e-filing (online or using the offline utility) via the official Income Tax e-filing portal.

1. Gather Documents: Keep ready your PAN, Aadhaar, Bank Statements, Form 26AS/AIS (for TDS/TCS details), and details of your Gross Receipts/Turnover.

2. Log In and Select Form: Log in to the e-filing portal, select File Income Tax Return, choose the correct Assessment Year, and select ITR-4 as the Income Tax Form.

3. Fill Personal Information: Verify your pre-filled personal details (PAN, Name, Address, etc.) and select the appropriate Residential Status and Tax Regime (New or Old).

4. Enter Presumptive Income (Schedule BP):

   • Select the applicable presumptive section (44AD, 44ADA, or 44AE).

   • Enter the Gross Turnover/Gross Receipts for your business or profession.

   • The system will automatically calculate the minimum presumptive income (e.g., 6%/8% for business or 50% for professionals). You have the option to declare a higher income if your actual profit is greater.

   • Crucial Note: Since the income is calculated on a presumptive basis, you cannot claim any further business expenses (like rent, electricity, phone, etc.) as they are already deemed to have been accounted for in the fixed profit percentage.

5. Report Other Income: Enter details of Salary, Income from One House Property, and Income from Other Sources (Interest, Dividend, etc.). This data is often auto-populated from your Annual Information Statement (AIS) and Form 26AS.

6. Claim Deductions (Part C): Claim eligible personal deductions under Chapter VI-A (e.g., Section 80C for investments, 80D for medical insurance, 80TTA/TTB for interest on savings accounts).

7. Compute and Pay Tax: The system will compute your Total Taxable Income and Tax Liability. Verify the TDS/TCS/Advance Tax amounts already paid. If there is any remaining tax payable, you must pay it before filing.

8. Final Submission and Verification: Submit the ITR-4. The final step is verification (e-Verification using Aadhaar OTP or EVC is the easiest and most common method). The return is considered filed only after successful verification.