ITR-3 vs ITR-4: Difference and Who Can File?

Income Tax Return (ITR) filing is crucial for every individual/ HUF/ self-employed, professional/ firm, etc, to comply with the provisions of the Income Tax Act, 1961 and avoid penalties. However, choosing the right ITR can be daunting as there are different ITR forms for different taxpayers based on their income sources, residential status and other criteria. ITR-3 and ITR-4 are filed by individuals/ HUF/firms (other than LLP) with income from profits or gains of business or profession; however, ITR-4 is filed by those individuals/ HUF/ Firms who opt for the presumptive taxation scheme under section 44AD, 44ADA and 44AE.

Here, we will discuss the key differences between ITR-3 and ITR-4 and their applicability.

The Income Tax department has released the excel-based utility for ITR-3 and ITR-4 for the FY 2024-25 (AY 2025-26). The utilities can be downloaded from the ‘download’ section on the Income Tax Department’s portal.

Link to download ITR-3 and ITR-4 excel-based utility

This article provides a comprehensive understanding of the eligibility for ITR-3 and ITR-4 (Sugam).

ITR-3

The taxpayers fulfilling the following criteria can file ITR-3:

Eligibility Criteria For Filing ITR-3

Individuals and Hindu Undivided Family(HUFs) are eligible to file ITR-3 if they have income from business or profession. Applicability for ITR-3 filing: 

• Income from business or profession (both tax audit and non-tax audit cases presumptive taxation is not opted)
• Salary income
• Rental income from house property
• Short or long-term capital gains
• Interest, dividends, winning from the lottery and any income from other sources.
• Income (interest and remuneration) as a partner in a firm

Who Is Not Eligible To File ITR-3 Form?

• Individuals and HUFs without income from a business, profession, or partnership firm are not eligible to file the ITR-3 Form. 
• Companies, charitable and religious trusts, Limited Liability Partnerships (LLP), firms, local authorities, bodies of individuals and associations of persons.

Due Date for Filing ITR-3  (For Assessment Year 2025-26)

ITR-4 (Sugam)

Who Can File ITR-4?

Resident Individuals, HUFs and partnership firms are eligible to use ITR-4 with business or professional income, and opting for presumptive taxation under Section 44AD, Section 44ADA, or Section 44AE. 

Below are the conditions for applicability for ITR-4 filing:

• Total income is up to Rs. 50 lakhs
• Business or professional income is computed on a presumptive basis under Section 44AD, 44ADA or 44AE.
• Income from Salary/pension,
• Rental Income from one house property, 
• Agricultural income (up to Rs. 5,000)
• Capital Gains Income (only u/s 112A not exceeding Rs.1.25 lakhs) without any carry forward of capital losses.
  
• Income from other sources such as interest, dividends, family pension, etc.

Who Cannot File ITR-4?

• Non-residents or Resident but not ordinarily resident (RNOR)
• Tax payer having income from the following sources:
  • Total Income from all the sources, exceeding Rs. 50 lakhs
  • Income from more than one house property
  • Agricultural income of more than ₹5,000
  • Capital Gains Income (He can still file ITR-4 if his capital gains under section 112A do not exceed ₹1.25 lakhs and he has no other capital gains income)
  • Foreign Income and Assets
  • Lottery or owning and maintaining race horses
  • Income taxable under Section 115BBDA (Dividend from the domestic company in excess of Rs. 10 lakhs) or Section 115BBE (tax on unexplained income and investments)
• A person is a director in any company
• Individuals have held unlisted equity shares at any time during the year 
• Taxpayers whose income tax is deferred on ESOPs
• Claiming relief u/s 90 or DTAAs

Freelancers such as bloggers, content writers, digital marketers, etc., can also file ITR-4. The due date for filing ITR-4 for Assessment Year 2025-26 is 15 September 2025.

Presumptive Taxation

1. Section 44AD

• Small business owners with turnover of up to Rs 2 crore or Rs 3 crore (where 95% or more receipts are via digital mode), can opt to pay tax under a presumptive scheme.
• Under Section 44AD, taxpayers can declare 8% or 6% (in case of online transactions) of the turnover as income and are not required to maintain books of accounts. This is applicable only to Traders and manufacturers, not applicable to service professionals or business covered under section 44AE.

2. Section 44ADA

Professionals whose receipts in a year are up to Rs. 50 lakhs (Rs 75 lakhs from FY 2024-25 onwards, where 95% or more receipts are via digital mode) can declare 50% of such receipts as income. Tax will be calculated on such declared income. Professions who can avail presumptive scheme under section 44ADA are:

• Architecture
• Accounting
• Engineering
• Legal
• Architect
• Medical
• Interior decoration
• Technical consultancy
• Film artists include actors, directors, producers, cameramen, singers, lyricists, costume designers, story writers, dialogue writers, editors, etc.
• Authorised Representative- This does not include a person who is carrying on an accountancy or legal profession or is an employee of the person represented. 
• Company Secretary
• Information Technology

3. Section 44AE

A taxpayer engaged in the business of plying, hiring or leasing goods carriages can opt for 44AE if he does not own more than 10 goods carriages at any time during the year. 

ITR-3 and ITR-4 Difference

Case 1: Atul runs a cloth retail shop and has opted for the presumptive income scheme.

Atul can choose to file ITR-4 if the gross turnover is less than Rs 2 crore or Rs 3 crore (in case of cash receipts not more than 5% out of the total receipts ). However, if he does not opt for the presumptive taxation scheme or declare profits less than the presumptive income under section 44AD and his income exceeds the basic exemption limit, he must maintain books of accounts and choose ITR-3. Even if he opts for presumptive taxation and his income falls below the basic exemption limit, or has other incomes like capital gains, speculative income, or is a partner in a firm, he can file ITR-3.

Case 2: Neha is an interior decorator and wants to know which ITR form should she file?

As a professional, as long as her gross receipts from her profession do not exceed Rs 50 lakh or Rs.75 lakh (in case her cash receipts out of the total receipts do not exceed 5%), she can opt for presumptive scheme of tax u/s 44ADA and file her return with the ITR-4 Form.

Case 3: Deepika had opted for presumptive income for FY 2023-24. She runs a wholesale business, and her turnover for FY 2024-25 was Rs 2.20 crores.

Since, Deepika’s turnover exceeds Rs 2 crore for the financial year 2024-25. Hence she has to file ITR-3 as ITR-4 is not applicable in cases where turnover exceeds Rs 2 crore. However, if out of Rs 2.2 crore turnover, ,95% or more transactions are via digital mode, she can opt for presumptive taxation scheme under section 44AD and file ITR-4.

Case 4: Rahul is an insurance agent whose income was Rs 18 lakhs in the financial year 2024-25. He wants to file an ITR-4.

Those running insurance commission businesses cannot file ITR-4. Therefore, Rahul has to file ITR -3 for the financial year 2024-25.

Case 5: Shashank is a practising heart specialist. His turnover for the financial year 2024-25 is Rs 85 lakhs. Shashank wants to file an ITR-4.

Shashank has his own practice and continues in the profession. Hence, he can file ITR-4 only if his annual receipts are up to Rs.75 lakhs. If his income is more than Rs.75 lakhs, he has to file ITR-3.  

Case 6: Prashant has two businesses. He has a manufacturing business with a turnover of Rs 2.4 crores and another business of truck hiring and leasing, which is eligible for presumptive income as per section 44AD and 44AE. Prashant wants to know which ITR to file.

Even though Prashant runs a business which is eligible under section 44AE, he shall have to file ITR-3 since his business income from manufacturing exceeds Rs 2 Crore for which a tax audit will be applicable. Return of income must include income from all sources and given Prashant’s first business, ITR-3 shall be applicable for filing his consolidated income details. However, if the total receipts from Prashant’s manufacturing business contain only up to 5% cash, the enhanced limit of Rs 3 crore turnover can apply to his manufacturing business, and he will be eligible to opt for presumptive taxation under section 44AD. If he can opt for presumptive taxation under section 44AD, has up to 10 goods carriages, and total income from the businesses does not exceed Rs 50 lakh, he can file ITR-4.

Case 7: Ashish is in the business of plying, hiring, or leasing goods carriage. In the financial year 2024-25, he owned 13 lorries.

The presumptive method of taxation under section 44AE applies only in cases where not more than 10 trucks are owned. Therefore, since Ashish owns more than 10 trucks, he has to file ITR-3.

Case 8: Vijay is in the business of plying, hiring, and leasing goods carriages and owns 5 goods carriage during the year but Vijay chooses not to opt for the 44AE scheme and want to declare income lower than the income estimated under section 44AE.

Vijay can declare income lower than what is calculated under section 44AE however, he shall have to maintain books of accounts as prescribed and will have to file ITR-3 for his income.

* all names are fictitious and used only for the purpose of illustration.