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ITR-4 Form is an income tax return form for those taxpayers, who have opted for the presumptive income scheme as per Section 44AD, Section 44ADA and Section 44AE and whose income is not more than Rs 50 lakh.

ITR 4, known as Sugam, can be used by any individual, HUF or a partnership firm which wishes is eligible to offer its income on presumptive basis. Under presumptive scheme of taxation a taxpayer is presumed to have earned a minimum income expressed as percentage of gross receipts of business or profession or as a fixed amount based on number of commercial vehicles owned. Please note that though a partnership can use ITR 4 if it is eligible for presumptive taxation but an LLP is not eligible to use ITR 4. This form can only be used by a person who is resident for income tax purposes. So a non resident cannot use it even if his income is below 50 lakhs and has income taxable on presumptive basis. In case you are director in any company or own shares in any unlisted companies you cannot use ITR 4.

Likewise, if you have any income under the head “Capital gains" or “Income from other sources" other than interest and family pension or have income from source outside India, you cannot use ITR 4 and you have to use ITR 3 where you have option to offer your income on presumptive basis.

In case your actual business or professional income is lower than that was is presumed by law, you cannot use ITR 4 and you have to use ITR 3 and in which case you have to get your accounts audited and get the report it submitted to the income tax department before submission of the ITR.

  1. Director of a Company
  2. Shareholder of unlisted company
  3. Has any financial asset located out of India
  4. An individual has signing authority in any account located outside India; or
  5. An individual has income from any source outside India
  6. An individual, HUF or partnership firm whose books of accounts should be audited under the Income Tax Act, 1961.

ITR-4 is applicable only to Individual/ HUFs/ Partnership firms having following sources of income-
  • Business income where turnover exceeds Rs. 1 crore.
Also, presumptive taxation scheme requires a taxpayer to disclose 8% profits of his turnover. Hence, if he wish to disclose profits of less than 8%, then he is required to file ITR-4.
  • Income from profession.
  • Income from salary.
  • Income from house property.
  • Income from other sources.
  • Income from capital gains from sale of shares, property etc.

  • If you have salary income, you will need Form 16 issued by your employer to enter salary details.
  • If you have earned interest on Fixed deposits or saving bank A/c. and TDS has been deducted on the same, you will need TDS certificates i.e. Form 16As issued by deductors to enter interest details.
  • You will need Form 26AS to verify TDS on salary as well as TDS other than salary.
  • If you are living in rented premises, then you will need rent paid receipts for calculation of HRA (in case you forgot to submit the same to your employer within time).
  • If you have any capital gain transaction in shares, you will need summary or Profit/loss statement of capital gain transactions of shares or securities during a year, if any for computation of capital gain.
  • In case you have sold out any property, you will need sale & purchase deed or property for computation of capital gain.
  • You will need your bank passbook, fixed deposit receipts (FDRs) to calculate amount of interest income.
  • If you have received rent from your rented house property, then you will need rental receipts to calculate rental income.
  • In case of business/profession, you will require books of accounts and records as a proof for calculating amount of profits of financial year.
Books of accounts includes cash book, journal, ledgers, Balance-sheet, Profit & Loss A/c., etc. Also bills, vouchers, invoices for purchases, expenses are required to be kept.
  • In case you want to claim any loss incurred during current year, then you will need document exhibiting the loss.
  • In case you wish to claim previous year's loss, you will need copy of ITR-V pertaining to previous year disclosing said loss.
  • You will also need documents or proofs for claiming tax saving deductions U/s. 80C, 80D, 80G, 80GG such as life & health insurance receipts, donation receipts, rent receipts, receipts for tuition fees etc, if the same were not considered in your Form 16.
ITR 4 shall not be filed if assessee has:
  1. To avail the benefit of carry forward and set of loss under house property;
  2. Loss under other sources;
  3. Any claim of relief under section 90 and/or section 91;
  4. Any claim of credit of tax deducted at source in the hands of any other person.
ITR 4 shall not be filed if assessee is governed by Portuguese Civil Code as per section 5A i.e., apportionment of income between spouses.

Income under the head other sources does not cover following:-
  1. winnings from lottery;
  2. owning and maintaining race horses
  3. income taxable at special rates under section 115BBDA / section 115BBE
Further deduction u/s 57(iia) is allowed (i.e., in case of family pension only).

  • Your Net income is estimated to be 8% of the gross receipts of your business. But if gross receipts are received through a digital mode of payment, then Net Income is estimated at 6% of such gross receipts and for cash receipts. However, the rate is the same at 8% of such cash receipts.
  • You don’t have to maintain books of accounts of this business.
  • You have to pay 100% Advance Tax by 15th March for such a business.
  • No need to comply with the requirement of quarterly instalments due dates (June, sep, Dec) of advance tax.

    In case of Advance Tax, the benefit of paying the advance tax in one instalment by 15th March is only granted for the business for which this scheme has been opted for. If the taxpayer has income which is other than from such business, where his tax liability exceeds Rs 10,000 in a year, he has to pay advance tax on such other income
  • You are not allowed to deduct any business expenses against the income. If you are running more than 1 business, the scheme has to be chosen for each business. For example, if you run 3 businesses where only 1 is assessed under section 44AD. The relief of not maintaining accounting records & no audit requirement is only applicable to the business to which this scheme applies. For other 2 businesses which are not covered under this section – the accounting records have to be maintained and audit is also required.

      • Your gross receipts or turnover of the business for which you want to avail this scheme should be less than Rs 2 crore.
      • You must be a ‘Resident’ in India. The scheme is not applicable to non-residents.
      • This scheme is allowed to an individual, a HUF or a partnership firm. It is not available to a Company or an LLP (Limited liability partnership).
      • The scheme cannot be adopted by the taxpayer,
      • The scheme cannot be adopted by the taxpayer, if he has claimed deduction under section 10, 10A, 10B, Section 10BA, or Section 80HH to 80RRB in the relevant year.

      • The taxpayer may be in any business – retail trading or wholesale trading or civil construction or any other business to avail this scheme.
      • But this method of income computation is NOT applicable to:
        • Income from commission or brokerage
        • Agency business
        • Business of plying, hiring or leasing goods carriage (see section 44AE)
        • Professionals – who are carrying on a profession of legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, an authorized representative, film artist, company secretary and information technology. Authorized representative means – any person, who represents someone, for a fee or remuneration, before any Tribunal or authority under any law. Film Artist includes a producer, actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screenplay writer, dialogue writer, dress designer – basically any person who is involved in his professional capacity in the production of a film.(see Sec 44ADA). These are the professions listed under section 44AA(1).
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