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ITR-4, also known as Sugam, is a simplified income tax return form prescribed for individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) that have opted for the presumptive income scheme under Section 44AD, Section 44ADA, and Section 44AE of the Income Tax Act, 1961. The presumptive taxation scheme aims to reduce the compliance burden for small taxpayers by simplifying the process of reporting their income and paying taxes.

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ITR 4

Understanding ITR-4: Comprehensive Guide for Filing

The Income Tax Return (ITR) forms in India cater to different categories of taxpayers, ensuring that the process of declaring income and paying taxes is systematic and clear. One such form is the ITR-4, also known as Sugam, specifically designed for taxpayers opting for the presumptive income scheme. This comprehensive guide aims to provide in-depth information on ITR-4, including who can file, who cannot file, and the necessary documents required for filing. This resource will assist your readers in understanding the intricacies of ITR-4, ensuring they adhere to tax regulations effectively.

 What is ITR-4?

ITR-4, also known as Sugam, is a simplified income tax return form prescribed for individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) that have opted for the presumptive income scheme under Section 44AD, Section 44ADA, and Section 44AE of the Income Tax Act, 1961. The presumptive taxation scheme aims to reduce the compliance burden for small taxpayers by simplifying the process of reporting their income and paying taxes.

The presumptive taxation scheme is primarily for small businesses and professionals who find it cumbersome to maintain detailed books of accounts. Under this scheme, income is presumed to be a certain percentage of the gross receipts or turnover, simplifying tax calculations and compliance.

Detailed Breakdown of Sections 44AD, 44ADA, and 44AE

Section 44AD applies to small businesses except those involved in the business of plying, hiring, or leasing goods carriages (covered under Section 44AE) and professions (covered under Section 44ADA). It is applicable to individuals, HUFs, and partnership firms (other than LLPs) whose gross turnover or receipts do not exceed ₹2 crore. Under this section, income is presumed to be 8% of the gross turnover or receipts. However, if the receipts are received through digital transactions, the presumptive income is reduced to 6%.

Section 44ADA is designed for professionals such as doctors, lawyers, architects, accountants, etc., whose gross receipts do not exceed ₹50 lakh. Under this section, income is presumed to be 50% of the total gross receipts.

Section 44AE applies to taxpayers engaged in the business of plying, hiring, or leasing goods carriages and who own not more than ten goods vehicles at any time during the year. Under this section, the income is presumed to be ₹7,500 per month (or part of a month) for each goods vehicle owned by the taxpayer.

Who Can File ITR-4?

ITR-4 is suitable for certain individuals, HUFs, and firms (excluding LLPs) who have opted for the presumptive taxation scheme. The primary categories of eligible taxpayers include:

Small Businesses: Taxpayers engaged in any business (excluding those mentioned in Section 44AE) with a gross turnover or receipts not exceeding ₹2 crore can opt for presumptive taxation under Section 44AD. Such businesses can file ITR-4, declaring their income as 8% (or 6% for digital receipts) of the turnover or receipts.

Professionals: Professionals such as doctors, lawyers, architects, and others whose gross receipts do not exceed ₹50 lakh can opt for presumptive taxation under Section 44ADA. Such professionals can file ITR-4, declaring their income as 50% of their gross receipts.

Owners of Goods Carriages: Taxpayers involved in the business of plying, hiring, or leasing goods carriages and owning not more than ten goods vehicles can opt for presumptive taxation under Section 44AE. They can file ITR-4, declaring their income as ₹7,500 per month per vehicle.

Individuals with Other Sources of Income: Taxpayers who have income from salary or pension, one house property, other sources (like interest income), and agricultural income up to ₹5,000 can file ITR-4, provided they meet the conditions of the presumptive taxation scheme.

Who Cannot File ITR-4?

Certain individuals and entities are explicitly excluded from filing ITR-4. This includes:

Non-Eligible Business and Professional Income: Taxpayers whose business turnover exceeds ₹2 crore or professionals whose gross receipts exceed ₹50 lakh cannot file ITR-4. They must use other ITR forms like ITR-3. Taxpayers who wish to claim deductions under Sections 10A, 10AA, 10B, 10BA, or those seeking relief under Sections 90, 90A, or 91 cannot use ITR-4.

Limited Liability Partnerships (LLPs) and Companies: LLPs and companies are not eligible to file ITR-4. They are required to use other forms like ITR-5 or ITR-6.

Non-Resident Indians (NRIs): NRIs and individuals categorized as residents but not ordinarily residents (RNOR) cannot file ITR-4.

Income from Multiple House Properties: Taxpayers having income from more than one house property cannot file ITR-4. They need to file ITR-2 or ITR-3.

Capital Gains: Taxpayers earning income from capital gains are not eligible to file ITR-4. They must file ITR-2 or ITR-3, depending on other sources of income.

Agricultural Income Exceeding ₹5,000: Taxpayers with agricultural income exceeding ₹5,000 are not eligible to file ITR-4.

Speculative and Non-Speculative Business Income: Taxpayers with speculative business income (such as intraday trading income) or non-speculative business income that does not fall under the presumptive taxation scheme are not eligible to file ITR-4.

Documents Required for Filing ITR-4

Accurate and timely filing of ITR-4 requires a set of documents and information to ensure compliance with tax laws. The key documents include:

PAN Card: The Permanent Account Number (PAN) card is mandatory for filing income tax returns. It serves as the primary identification for the taxpayer.

Aadhaar Card: The Aadhaar number is required under Section 139AA of the Income Tax Act for identity verification and e-verification of the return.

 Bank Account Details: Details of all bank accounts held during the previous financial year, including the account number, IFSC code, and type of account (savings/current).

Form 16: Form 16 is issued by employers and contains details of salary income and the tax deducted at source (TDS). It is essential for taxpayers with salary income.

 Form 26AS: Form 26AS is an annual tax statement that provides details of TDS, advance tax, and self-assessment tax paid. It can be downloaded from the TRACES portal or through net banking.

Books of Accounts and Financial Statements: Although the presumptive taxation scheme simplifies accounting requirements, basic records of turnover/gross receipts, expenses, and bank statements are necessary.

Proof of Digital Transactions: For taxpayers claiming a 6% presumptive income on digital transactions under Section 44AD, evidence of such transactions (like bank statements) is required.

Investment Proofs: Documents supporting various investments and deductions claimed under Sections 80C, 80D, etc., such as LIC premiums, PPF contributions, health insurance premiums, etc.

Rent Receipts: For claiming House Rent Allowance (HRA), rent receipts and the rental agreement should be maintained.

Loan Statements: For claiming deductions on interest paid on home loans or education loans, relevant loan statements from the lending institution are required.

Details of Assets and Liabilities: If the business turnover exceeds ₹50 lakh, details of assets and liabilities at the end of the financial year must be furnished.

Other Income Proofs: Documents related to other sources of income, such as interest certificates, dividend receipts, and other income statements.

Filing Procedure for ITR-4

Filing ITR-4 can be done either online through the Income Tax Department’s e-filing portal or offline by submitting a physical return at the Income Tax Office. Here’s a step-by-step guide:

Penalty for late ITR 4 Filing

Late filing of income tax returns can result in various penalties, depending on your total income.

Individuals with a total income exceeding Rs 5 lakh may face a penalty of Rs 5,000, while those with income below this threshold may incur a reduced penalty of Rs 1,000.

Additionally, if you owe taxes and fail to file the return by the due date, you will be liable for additional interest at a rate of 1% per month until you submit the return.
In more severe cases, penalties can be imposed for underreporting or misreporting of income.

Underreporting may lead to penalties of up to 50% of the tax underreported, while misreporting can result in penalties of up to 200% of the misreported tax amount.
Furthermore, repeated failure to file tax returns despite reminders from tax authorities may lead to prosecution procedures. This could result in imprisonment ranging from three months to seven years, depending on the outstanding tax liabilities.

It is crucial to file your ITR promptly and accurately to avoid these legal and financial consequences.

How can Virtual Tax Assist in ITR-4?

Virtual Tax offers valuable assistance in filing your ITR-1 (Sahaj) income tax return. We begin by aiding you in selecting the appropriate form based on your income sources, ensuring precision in filing.

We meticulously calculate your tax liability, conduct error checks, and prioritize timely filing to minimize the risk of penalties or tax notices. If eligible, we aid in processing your income tax refund efficiently.

Our team of tax experts is readily available to address your queries and provide guidance throughout the process. Virtual Tax also keeps you updated on tax law changes and deadlines, ensuring your compliance with the latest regulations. With our secure platform, you can trust us to safeguard your financial data while simplifying your ITR-1 filing experience .

Frequently asked questions?

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