ITR-4 Form (Sugam) - What is ITR-4, Who Should File, Applicability and How to File ITR-4 For AY 2024-25

The current ITR-4 is to be filed by small business owners who do not maintain books of accounts but only maintain sales ledger in approximate volume. This includes online sellers, traders, wholesalers and manufacturers, etc.

Then freelancers such as online content writers, bloggers, vloggers, etc. need to file the ITR-4 form. Also, professionals like chartered accountants, doctors, lawyers and engineers, etc. whose income is computed on a presumptive basis u/s 44AD, 44ADA or 44AE need to file this form. 

Individuals who are drawing a salary as well as earning additional income from freelancing activities or part-time business also can file ITR-4 Form. 

Budget 2023 Update:

Budget 2023 has amended Sec 44AD and Sec 44ADA to revise presumptive taxation limits for FY 2023-24 (AY 2024-25) as follows:

Note: *If the amount received in cash in the previous year does not exceed 5% of the total turnover.

What is the ITR-4?

ITR-4 is the Income Tax Return form for taxpayers who opt for a presumptive income scheme under Section 44AD, Section 44ADA and Section 44AE of the Income-tax Act,1961.   
However, if the turnover of the business mentioned above exceeds Rs.2 crore, the taxpayer will have to file ITR-3.

Who is Required to File ITR-4?

ITR-4 is to be filed by the individuals/HUF/Partnership firm whose total income of FY 2023-24 includes as below:

• Income from business income calculated under Section 44AD or 44AE
• Income from profession calculated under Section 44ADA
• Income filed in  ITR1, the total income from all the sources together should not exceed Rs. 50 Lakhs.

Who is Not Required to File ITR-4 for AY 2024-25?

• An individual whose total income exceeds rupees 50 lakhs.
• An individual who is either a director in a company 
• An individual who has invested in unlisted equity shares cannot use this form.
• An individual, HUF or partnership firm who is required to maintain the books of accounts under the Income-tax Act, 1961.
• Resident but not ordinarily residents (RNOR) and Non-residents
• Individuals  who have earned income through the following means: Lottery, racehorses, legal gambling, etc.
• Individual who has more than one house property
• Taxable capital gains (short-term and long-term)
• Agricultural income exceeding Rs 5,000
• A resident that has assets (including financial interest in any entity) outside India or is a signing authority in any account located outside India
• Individuals claiming relief of foreign tax paid or double taxation relief under section 90/90A/91
• Gains from Virtual Digital Assets (Crypto currency)
• Individuals for whom the TDS has been deducted under Section 194N

Major Changes in ITR-4 Form for AY 2024-25

Below changes are incorporated in the ITR-4 form of the AY 2024-25:

• The default tax regime has been changed to the new tax regime following amendments introduced by the Finance Act 2023 to Section 115BAC. For individuals, HUFs, AOPs, BOIs, and AJPs, the new tax regime now applies by default. Taxpayers who prefer the old tax regime must explicitly choose to opt-out. An individual filing ITR 4 must submit Form 10-IEA to opt out of the new tax regime. 
• ITR forms 4 has been updated to include a column for disclosing the amount eligible for deduction under Section 80CCH. Section 80CCH, was \introduced by the Finance Act 2023, allowing individuals enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after 01-11-2022 to claim a tax deduction for the total amount deposited in the Agniveer Corpus Fund. 
• The Finance Act 2023 has increased the turnover threshold limit for opting for the presumptive taxation scheme under Section 44AD from Rs. 2 crores to Rs. 3 crores, provided that receipts in cash do not exceed 5% of the total turnover or gross receipts for the previous year. Additionally, Section 44ADA was amended to raise the threshold limit of gross receipts from Rs. 50 lakhs to Rs. 75 lakhs, given that receipts in cash do not exceed 5% of the total gross receipts for the previous year. To reflect these changes, ITR-4 has been updated to include a new column for disclosing "receipts in cash" under Schedule BP. The definition of cash includes cheques or bank drafts that are not account payee. 

What is the Structure of ITR-4?

ITR-4 is divided into parts as mentioned below: 

PART A: General Information
PART B: Gross total income from the five heads of income
PART C: Deduction and total taxable income
PART D: Tax computation and tax status
Schedule BP: Details of income from Business-Section 44AD, 44ADA and 44EA
Information regarding turnover/Gross receipts reported for GST: Furnish the GSTIN
Financial Particulars of Business: Mention the asset and liabilities that you own
Schedule IT, TCS and TDS 1: Statement of payment of advance tax and tax on self-assessment, tax collected at source and TDS from salary
Schedule TDS2: Statement of tax deducted at source on income other than salary.
Verification column: Declare that all your information furnished are true to your knowledge and add your signature.

How do I File my ITR-4 Form?

You can submit your ITR-4 Form on ClearTax.

Step 1: Log in or sign up on the Cleartax portal. We’ve added the link to the portal for you in the description below. Login to your account, and let’s get started.

Step 2: If you are filing with us for the first time, you must link your PAN by entering your PAN, Date of Birth, and the OTP received on your registered mobile number. Linking your PAN will allow us to submit your return to the income tax department. 

Step 3: But if you filed with us last year and your PAN is already linked, you will directly see this screen.

Step 4: Here, you will have to complete another OTP verification if you want us to pre-fill the details for you. So there are two options here: if you have your Aadhaar registered mobile number with you, you can opt for Aadhaar registered mobile number option and enter the single OTP received as an SMS. And if you don’t have it, then select the IT Department registered mobile number option and enter two OTPs- one received on your mobile and the other one on e-mail.

Step 5: Voila! Most of your information has been auto-filled.

Step 6: Click on 'Continue to e-File’.

Step 7: Here you will see 4 tabs: Personal Info, Income Sources, Tax Saving, and Tax Summary. Let us first look at the personal info tab. All your personal details like name, address and other details will appear here. You can expand each section and review these details. In case you wish to change some information here, you have the option to edit these details. 

Step 8: Now let us move to the Income Sources section. 

1. First up is salary. It may not be applicable in your case if you have business or profession income. 
2. Then there is ‘Rental or house property Income’ 
3. ‘Other Income’ section is where you can add all your dividend income, interest income from savings banks, FDs, income from online gaming and also agricultural income. We fetch interest, FD Income and dividend income directly from the Prefill, You just need to review if something is missing and add them.
4. Then next is the ‘Capital Gains’ section which is where all your income from stocks, mutual funds, US stocks, ESOPs, sale of land or building or jewellery will go. 
5. ‘Business Income’ here you can fill up details regarding your business income, i.e, income under presumptive taxation.

Step 9: Now comes the important section which is the ‘Professional, Freelancing and Business Income’ section. So broadly there are 5 sub-sections here. The first section is 44ADA- this is for professionals. The income tax law has specified a few professions and made it clear that only these professionals can opt for 44ADA: 

Professions like 

1. Legal
2. Medical
3. Engineering
4. Architecture
5. Accountancy
6. Technical Consultancy
7. Interior Decoration
8. Film Artists like cameraman, producer, editor, actor, director, singer, etc are specified.

Step 10: Under ‘Nature of Business’ you will have nearly 40 codes. Select the appropriate code - You can just search for your profession if you do not know your code, that's absolutely fine. And mention the trade name and description.  If you have multiple professions, you can add them all here. 

Note: Your revenue should be less than or equal to Rs 50 lakh and expenses cannot be more than 50% i.e. by default it is assumed that your expenses or cost will not be over 50% of your income.

Step 11: Now let’s look at the 44AD section. 44AD is mainly for small businesses. Just like there were some conditions under 44ADA, there are some conditions for 44AD too. The first condition is that your turnover, i.e. nothing but your sales, must be less than 2 crores and the second condition is that your profit must be more than or equal to 8% of your turnover.

Step 12: Now, it’s time to save some taxes. Go to the tax-savings section and claim all the ‘Deductions’. If you have made donations, tax saving investments like PPF, insurance, ELSS mutual funds, then don't forget to add all those details here. This will help you save some taxes. 

Step 13: If you scroll down, you will find the ‘tax-paid’ section. You can upload your Form 26AS to auto-populate the details. All the details of TDS deducted by your clients and also the advance tax you’ve paid, will appear here. If you’ve bought a car or if you’ve gone on a foreign vacation, TCS, i.e. tax may have been collected at source. That also gets filled from 26AS.

Step 14: Now scroll down, and you’ll see the other disclosures tab. If any of these conditions apply to you, then enter those details.

Step 15: Click on ‘Go to next’ and you will see a tax summary. Based on all the details you’ve added, we have auto-selected the ITR Form for you. Note that you can switch between old and new tax regimes only once in a lifetime. So be careful when selecting the tax regime.  
Once you are done reviewing all the details in the summary report, click on ‘File Tax’. If you have any tax dues, you can refer to the guide here on ‘how to make the tax payment online’ and complete your tax payment in minutes.

Step 16: Once done, don’t forget to e-verify your return and collect exclusive rewards from over 50+ brands!

  
Presumptive Income & its Taxation – Section 44AD

When you are running a small business, you may not have enough resources to maintain proper accounting information and calculate your profit or loss. This makes it difficult to keep track of your income and taxes from such a business.  

With this in mind, the Income Tax Department has laid out some simple provisions where your income is assumed based on the gross receipts of your business. This method is called the presumptive method, where tax is paid on an estimated basis.   

Features of this Scheme

• Your Net income is estimated to be 8% of the gross receipts of your business. But from FY 2016-17, 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 the 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. 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 the other 2 businesses which are not covered under this section – the accounting records have to be maintained and an audit is also required.

Eligibility Criteria for this Scheme

• Your gross receipts or turnover of the business for which you want to avail of 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, if he has claimed a deduction under section 10, 10A, 10B, Section 10BA, or Section 80HH to 80RRB in the relevant year.

Not sure which ITR form you need to use? Read our guide for help.

Eligible Businesses 

• The taxpayer may be in any business – retail trading or wholesale trading or civil construction or any other business to avail of 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).

Let us consider an example:  

Devesh runs a medical shop in his colony. The receipts of his business are Rs 1,50,00,000 in the financial year 2023-24. Can Devesh take benefit of the scheme under section 44AD?   

Devesh is a resident and his receipts from this business are less than Rs 2 crore. His business is not listed under the non-eligible businesses list and therefore he can avail the benefit of this scheme under section 44AD.

Deduction for Business Expenses

No business expenses are allowed to be deducted from the net income. Depreciation is also not deductible.

However, in the case of a partnership firm, a separate deduction for remuneration of partners and interest paid to partners is allowed. This must be within the limit specified under section 40(b).

Even though depreciation is not allowed as a deduction, written down value (WDV) of the assets shall be considered as if depreciation has been allowed.

For example, Rohit runs a Kirana shop and his gross receipts are Rs 75,12,260 from this business. He decided to opt for the scheme under section 44AD. He also wants to claim depreciation for 1 large refrigerator and a computer with a billing system he purchased for Rs 2,50,500. He also spent Rs 1,50,000 buying new racks for displaying his goods.   

Since Rohit has opted for the presumptive scheme under section 44AD, his net income is computed as 8%(assuming all cash receipts) of Rs 75,12,260 = Rs 6,00,981. Under this scheme, no deductions are allowed from income. Rohit will not be allowed to deduct depreciation from this income. He cannot deduct expenses for the purchase of the new rack.

Can the taxpayer declare higher or lower income than 8% of gross receipts?

The taxpayer can voluntarily declare a higher income and pay tax on it. In case the taxpayer chooses to declare lower income than 8% of gross receipts – he shall have to maintain books of accounts and get them audited.   

Click here to read more about book keeping and audit requirements.   

For example, Ritesh runs a stationery shop and his turnover from this business is Rs 85,20,000. He wants to opt for the scheme under section 44AD and therefore his income shall be Rs 6,81,600 (at 8% of gross receipts, assuming all cash receipts).   

However, Ritesh’s actual income from the business works out to Rs 5,74,000. Ritesh decides to not opt for the scheme under section 44AD and pay tax on the actual income of his business. However, since he’s not opting for this scheme he has to maintain proper accounting records and also get his records audited.

Computing Turnover or Gross Receipts :

Gross receipts or Turnover mean the total collections of the business. The receipts shall be inclusive of GST. The receipts shall also include delivery charges as well as receipts from the sale of scrap.   

Discounts given, advances received and money received on the sale of assets should be excluded.

Presumptive taxation under Section 44AE

For those who are in the business of plying, leasing or hiring trucks a scheme similar to the presumptive income scheme under section 44AD is available.

Eligibility Criteria:

• You should be in the business of plying, leasing or hiring goods carriages.
• You should not own more than 10 goods carriages at any time during the year. Include carriages taken on hire purchase or on instalments.
• You may be an individual, HUF, Company or partnership firm

Features of this scheme:

• Net taxable income from a goods vehicle other than heavy goods vehicle (including any goods carriage) will be calculated as Rs 7,500 per month for each vehicle per month or part thereof during the FY in which the vehicle is owned by the assessee.
• The above calculation will be irrespective of heavy goods vehicles (more than 12000 kgs) and light goods vehicles (less than or equal to 12000 kgs).
• The assessee is not required to maintain books of accounts under this business
• The advance tax has to be paid 100% by 15th March for such businesses.

Part of a month shall be rounded off to the next month. For example, if a goods carriage is owned for 9 months and 3 days, the net income shall be calculated as if the carriage was owned for 10 months. 

Deduction for Business Expenses: 

• No business expenses are allowed to be deducted from the net income. Depreciation is also not deductible.
• However, in the case of a partnership firm, a separate deduction for remuneration of partners and interest paid to partners is allowed. This must be within the limit specified under section 40(b).
• Even though depreciation is not allowed as a deduction is written down value (WDV) of the assets shall be considered as if depreciation has been allowed.

Let’s see the calculation with an example,   

Rohan is engaged in the business of plying, hiring or leasing goods carriages, and owns 5 trucks and another 2 trucks which have been taken on instalments. Rohan wants to know what will be his income from this business.  

Rohan can opt for the scheme under section 44AE since he earns less than 10 trucks. He owns 7 trucks in total, including trucks which have been purchased on instalments even if some instalments are unpaid.   
Rohan’s income from this business shall be Rs 7 trucks x Rs 7,500 x 12 months = Rs 6,30,000 shall be Rohan’s net income from this business. No business expenses can be claimed from this income. (Assuming that the trucks are light good vehicles, in which the gross weight of the truck is less than 12,000 kg). 

Note : If the gross weight of the trucks exceeds 12,000 kgs then it would be considered as heavy goods vehicle and 1,000 per ton of gross vehicle weight per month will be calculated as net taxable income.

Can the taxpayer declare higher or lower income?   
The taxpayer can voluntarily declare a higher income and pay tax on it. In case the taxpayer chooses to declare lower income than mentioned above – he shall have to maintain books of accounts under section 44AA and get them audited.

Presumptive taxation under Section 44ADA

The benefit of Presumptive tax rates was only available to businesses. But now this benefit has been extended to professionals also. It will be applicable to the professionals, whose total gross receipts do not exceed Rs 50 lakhs in general or Rs 75 lakhs, if the amount received in cash does not exceed 5% of the total turnover or gross receipts in a financial year..

Presumptive Tax Rate:

The income of the professionals opting for this scheme would be assumed at 50% of the total gross receipts for the year. 

Applicability of the scheme:

The scheme is applicable only to a resident assessee, who is an individual, HUF or Partnership and not LLP (Limited Liability Partnership Firm). The persons engaged in the following profession can opt for this presumptive Income scheme:

• Medical
• Engineering
• Legal
• Architectural Profession
• Accountancy Profession
• Technical Consultancy
• Interior Decoration

No requirement for Maintenance of books of Account:

Professionals opting for this scheme need not maintain books of account required under section 44AA. They also need not get the books of account get audited under section 44AB.

Deduction for Business Expenses: 

No business expense is allowed to be deducted from the net income. Depreciation is also not deductible. Even though depreciation is not allowed as a deduction. Written down value (WDV) of the assets shall be considered as if depreciation has been allowed.

Can the taxpayer declare higher or lower income?

The taxpayer can voluntarily declare a higher income and pay tax on it. In case the taxpayer chooses to declare lower income than 50 % of the total gross receipts- he shall have to maintain books of accounts under 44AA and get them audited.

Major changes in ITR-4 form in AY 2023-24 and AY 2024-25

The below changes are incorporated in the ITR-4 form of the FY 2022-23 and continue to apply for FY 2023-24 as well:

• Under new forms, the 44AD Business Turnover limit is Rs 3 crore (if cash transactions are less than 5%). Similarly, under section 44ADA, professional receipts limit is Rs 75 lakhs (if cash transactions are less than 5%).

Major Changes made in ITR-4 for AY 2022-23

The following are the key changes introduced in the ITR-4 Form for the assessment year (AY) 2022-23:

• As a taxpayer, you need to disclose whether you had opted for the new tax regime under Section 115BAC, and also if Form No. 10-IE was filed in FY 2020-21. Further, you can choose to opt, not opt, to continue, or even opt out of the new tax regime for FY 2021-22
• In case a resident individual has income tax deferred on an employee stock ownership plan (ESOP), they  are restricted to file ITR‐4 Form
• A quarterly breakup of dividend income is required to be provided  
• Schedule DI, which was inserted for AY 2020-21, has been removed

Major Changes made in ITR-4 for AY 2021-22

• There are no major changes in ITR 4 as compared to last year.
• ITR 4 for AY 2021-22 has been updated with a declaration for choosing between old and new tax regimes. The declaration is under Part A- general information as ‘ Are you opting for a new tax regime under section 115BAC (Yes or No)? If yes, please furnish the date of filing of Form 10IE along with the acknowledgement number’.
• Part B- Under income from other sources, a drop-down like interest from saving account, deposit etc to be provided in the e-filing utility specifying the nature of income. In the case of dividend income, a quarterly breakup is to be provided for allowing applicable relief from the charge of interest for default in payment of advance tax under section 234C.
• Schedule DI that was inserted for AY 2020-21 has been removed.

Major Changes made in ITR-4 for AY 2020-21

• Individual taxpayers who meet the criteria of (a) making cash deposits above Rs 1 crore with a bank or (b) incurring expenses above Rs 2 lakh on foreign travel or (c) expenditure above Rs 1 lakh on electricity should also file ITR-1. The taxpayer should indicate the amount of the deposit or expenditure.
• Under Part A, the ‘Govt’ checkbox stands changed to ‘Central Govt’ and ‘State Govt’, and a checkbox ‘Not applicable (e.g. family pension etc.) has been introduced under the ‘Nature of employment’ section.
• Return filed under section has been segregated between normal filing and filed in response to notices.
• The ‘Schedule VI-A’ for tax deductions is amended to include deductions under Section 80EEA and section 80EEB. A drop-down is provided to enter details of donations under section 80G
• In ‘Schedule BP’, gross turnover or gross receipts to include revenues from prescribed electronic modes received before the specified date.
• The details of tax deduction claims for investments or payments or expenditures made between 1 April 2020 and 30 June 2020.

Major Changes made in ITR-4 for AY 2019-20

• ITR 4 form for FY 2018-19 is not applicable to an individual who is either a director of a company or has invested in unlisted equity shares.
• Under Part A, the ‘Pensioners’ checkbox has been introduced under the ‘Nature of employment’ section.
• Return filed under section has been segregated between normal filing and filed in response to notices.
• Deductions under salary will be bifurcated into standard deduction, entertainment allowance and professional tax.
• 80G Deduction: The amount of Donation is bifurcated into cash and other modes.
• Separate Business details like Name of business, business code, and description for Section 44AD, 44ADA & 44AE.
• New fields under section 44AE have been introduced like Registration No. of goods carriage, Whether owned/leased/hired, Tonnage Capacity of goods carriage (in MT), No. of months for which goods carriage was owned/leased/hired by assessee etc.
• Under GST  details the turnover text has been replaced by “Annual value of outward supplies as per the GST returns filed”. 
• ‘Deemed to be let out property’ option is now available under ‘Income from house property’.
• The taxpayers will be required to provide income-wise detailed information under the ‘Income from other sources’.
• A separate column is introduced under ‘Income from other sources’ for deduction u/s 57(iia) – in the case of family pension income.
• Section 80TTB column has been included for senior citizens.

How to file ITR on the government portal?

1. Go to the Income Tax e-Filing portal, https://www.incometax.gov.in/iec/foportal/
2. Log in to the e-filing portal by entering your user ID (PAN), Password, and Captcha code and click 'Login'.
3. Click on the 'e-File' menu and click the 'Income Tax Return' link.
4. Click on ‘Continue’.
5. Read the instructions carefully and fill in all the applicable and mandatory fields of the online ITR form.
6. Choose the appropriate Verification option in the 'Taxes Paid and Verification' tab.
7. Choose any one of the following options to verify the income tax return:
   1. I would like to e-verify
   2. I would like to e-verify later within 120 days from the date of filing.
   3. I don't want to e-verify and would like to send a signed ITR-V through normal or speed post to "Centralised Processing Center, Income Tax Department, Bengaluru - 560 500" within 120 days from the date of filing.
8. Click on the 'Preview and Submit' button, Verify all the data entered in the ITR.
9. 'Submit' the ITR.
10. On Choosing the 'I would like to e-Verify' option, e-Verification can be done through any of the following methods by entering the EVC/OTP when asked for.
11. The EVC/OTP should be entered within 60 seconds else, the Income Tax Return (ITR) will be auto-submitted. The submitted ITR should be verified later by using the 'My Account > e-Verify Return' option or by sending a signed ITR-V to CPC.

Also read about:  
1. Which ITR Should I File  
2. How to file ITR Online  
3. How to file ITR-1 (SAHAJ) Online  
4. What is ITR 2 Form & How to File ITR-2  
5. What is ITR 3 Form & How to File ITR-3  
6. What is ITR-5 Form, Structure & How to File ITR 5  
7. ITR 6  
8. How to File and Download ITR-7 Form  
9. ITR 3 vs ITR 4  
10. ITR 1 vs ITR 4  
11. How to File ITR-2 for Income from Capital Gains FY 2022-23