ITR 1 vs ITR 4: Know the Key Differences And Who Can File?

According to the Income Tax Act of 1961, every individual, including salaried and self-employed, must file an Income Tax Return (ITR). Depending on your type of income or category, it is imperative to submit the appropriate ITR form on or before the specified due date. If you choose the wrong form, you must go through the hassle of filing your ITR again.

So, if you are confused between the ITR forms, especially ITR 1 and ITR 4, you can rely on this article. This article will briefly discuss the forms, helping you understand the key differences between the two.  

Significance of Filing Income Tax Return

The income tax department mandates every earning individual to file ITR. Take a look at some of the reasons why you should not skip filing the applicable ITR:

• Your tax contributes towards nation-building. For instance, in the financial year 2022-23, the Central Government collected Rs 16.61 lakh crore from direct tax payments. Henceforth, the government can utilise this amount for different developmental activities.
• It makes the processing of loans relatively easier. If you wish to apply for a loan, the concerned lender will ask for your income tax return before sanctioning the loan amount.
• In case you have suffered heavy losses from your business or profession (under capital gains or profit and gains), you can carry forward such losses to the next financial year. All you need to do is file your income tax return.
• It permits you to claim your TDS return seamlessly. After filing your income tax return for the specified year, the income tax department adjusts the TDS paid and evaluates your net tax liability. If you are not required to pay taxes, you can file ITR to claim a refund.

So, if your gross income is taxable, it is crucial to file the ITR applicable to you. Depending on your income, there are different ITR forms for different individuals; however, the returns filed by most individuals are ITR 1 (SAHAJ) and ITR 4 (SUGAM). Read on to know the key differences between them.

All About ITR 1

ITR 1 or SAHAJ is a type of return filing form. If you are an individual earning an income from pension or salaries, single house property or other sources (excluding betting, gambling, and lotteries), you are eligible to file ITR 1 form. Also, for residential individuals having an agricultural income of up to Rs 5000, ITR 1 form is applicable. Additionally, if the income of your spouse or minor is clubbed together, you can also file this particular form. However, it only applies if the income falls under a definite head, as mentioned in ITR 1. 

To file ITR 1, you need to keep some documents ready such as Form 16, investment payment premium receipts (if applicable), and house rent receipts (if applicable). 

All About ITR 4

ITR 4 or Sugam is another type of ITR form applicable to individuals, HUFs, and Partnership Firms generating an income from a business or profession. Additionally, if you have chosen presumptive taxation on your business income under Section 44 AE, 44Ada and 44ADA of the Income Tax Act, 1961, you have to file ITR 4 form.

In order to file ITR 4, it is essential to keep the following documents ready: Form 16, Form 16A, Form 26 AS and AIS, housing loan interest certificates, rental agreements, bank statements, rent receipts and receipt of investment premium payments. 

Key Differences Between ITR 1 and ITR 4

Both ITR 1 and ITR 4 are the most commonly used forms when it comes to ITR filing. However, from the above piece of information, it is evident that there are some slight differences. For a more comprehensive understanding, take a look at the table given below:

Due Date to File Income Tax Return for AY 2023-2024

After knowing about the two types of forms (ITR 1 and ITR 4), it is essential to know about their due dates. The due date to file ITR in the assessment year 2023-24 is 31st July 2023 for the majority of taxpayers. However, for companies, LLPs and some individuals who need to get their accounts audited before filing the return, it is 31st October 2023. 

Conclusion

For error-free tax filing, every taxpayer must assess these provisions mentioned above. One of the basic differences between ITR 1 and ITR 4 lies in the presumptive business scheme. This specific provision is applicable to ITR 4 but not ITR 1. At the same time, also ensure to file your ITR within a specified date. If you fail to do so, you will have to pay interest under Section 234A at 1% per month.

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