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ITR-4 Form

A comprehensive guide to understanding the ITR-4 Form

Updated on :  

08 min read.

The current Income-tax Return (ITR) Form-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 ITR-4 Form. Also, professionals like chartered accountants, doctors, lawyers and engineers, etc. 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 need to file ITR-4 Form. Furthermore, individuals who make profits through Futures and Options (F&O), cryptocurrency, commodities, or forex need to file this particular form. 

What is the ITR 4?

ITR-4 Form is the Income Tax Return form for the taxpayers who opt for a presumptive income scheme under Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act.

However, if the turnover of the business mentioned above exceeds Rs 2 crores, 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 AY 2020-21 includes as below:

  • Business income under section 44AD or 44AE
  • Income from profession calculated under section 44ADA
  • Salary/pension having income up to Rs 50 lakh
  • Income from One House Property having income up to Rs 50 lakh (excluding the brought forward loss or loss to be carried forward cases under this head)
  • Income from Other Sources having income up to Rs 50 lakh (Excluding winning from lottery and income from horse races).

Note: Freelancers engaged in the above profession can also opt for this scheme if their gross receipts don’t exceed Rs 50 lakhs.

Who is not required to file ITR-4 for AY 2022-23?

  • An individual having income from salary, house property or other sources above Rs 50 lakh cannot use this form.
  • An individual who is either a director in a company and has invested in unlisted equity shares cannot use this form.
  • An individual, HUF or partnership firm whose books of accounts should be audited under the Income Tax Act, 1961.
  • Resident but not ordinarily residents  (RNOR)
  • Non-residents
  • In case an individual is either a director in a company or has invested in unlisted equity shares 
  • Deferred tax on ESOP received from employer being an eligible start‐up
  • Having an agricultural income of more than Rs 5,000

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

Financial Particulars of Business

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

ITR-4 Form: Key Changes 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

How do I file my ITR-4 Form?

You can submit your ITR-4 Form on ClearTax.

  • Log in to your ClearTax account using your login credentials. To begin ITR filing, click on the ‘Start Filing’ button
  • You are then required to add yourself as a client by linking your permanent account number (PAN).  To do that enter your ‘PAN Card Number’ and ‘Date of Birth’ and choose a method for OTP verification- either ‘Aadhaar registered mobile number’ or ‘IT Department registered mobile number’.
  • ClearTax pre-fills the salary and personal information details for you. All you have to do is complete another OTP verification. 
  • The preview of your pre-filled personal and income information will be as follows
  • If you want to upload your Form No. 16, you can do the same by clicking on the button ‘Upload form 16’
  • Go to add details of business income under ‘Income sources’
  • Add income from business or profession
  • Enter details 44AD
  • Enter details 44ADA
  • Enter details 44AE
  • Scroll down, Add no books of account income
  • Nature of business
  • Scroll down, expand, In case regular books of accounts are not maintained, fill in the details here and save
  • Now, fill in audit information, if applicable
  • Now, go to the ‘Income sources’ dashboard and fill in other income details like salary, house property income, capital gains and other sources
  • After filling in all the income details, go to the ‘Deductions’ tab, and review the investment details (such as LIC, PPF, etc.). If you want to add more tax-saving details, you can edit the fields and claim tax benefits here. For instance, interests earned on your savings account of up to Rs 10,000 can be claimed under Section 80TTA
  • Now, let’s look at the conditions in the other disclosures tab. If any of them apply to you, fill in those relevant sections. For instance, if your total income after deductions exceeds Rs 50 lakh, you must fill in the schedule AL. Here, fill in details of all your assets and liabilities if they were not included in the balance sheet earlier. If you are a non‐resident or ‘resident but not ordinarily resident’, only the details of assets located in India are to be mentioned. 
  • Likewise, in the current account deposits section, you will have to add the total amount deposited if you have deposited more than Rs 1 crore in FY 21-22
  • Finally, you can see a tax summary. You will have to choose the same regime that you chose last year- either old or new. If you wish to opt for the new regime for the very first time, then please note that you will not be allowed to change the tax regime every year. Businesses can choose the new tax regime only once in a lifetime. Review all the details in the summary report and proceed to e-filing. 
  • Once these parts are filled, you would also provide a self-declaration. You will need to declare that all the information in return, including the amounts, is true to your knowledge.
  • Click on ‘Proceed to e-File’ and here you go
  • Your payment is successful and your return is being submitted to the income tax department
  • On completion of payment, you will see a message which shows the ITR filing acknowledgement number
  • Finally, the ITR is successfully submitted to the income tax department.
  • You need to e-verify your income tax return. Verification of return is important to complete the return filing process.
  • You can also e-verify your returns through the BLACK app by ClearTax

Presumptive Income & its Taxation – under 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 2020-21. 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 bookkeeping 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 (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

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 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.

Frequently Asked Questions

Can I file ITR 4 offline also?

Yes, you can file offline ITR 4 only if:
a) You are an individual and 80 years or more in age
b) you are an individual the income is less than Rs. 5 lakh and who do not have to claim a refund in the income tax return.

If I am opting presumptive scheme so can I claim a deduction of other expenditures and depreciation?

No, if a person is paying tax @ 8% as per section 44AD then he cannot claim depreciation or any other expenditure.

What is a presumptive taxation scheme (PTS)?

The presumptive taxation scheme (PTS) was introduced to provide relief to small taxpayers.  An individual adopting this scheme to file the tax return can declare income at a prescribed rate and, in turn, is exempted from maintenance of books of accounts and also from getting the accounts audited. However, in order to calculate the turnover, one still needs to maintain some books of accounts such as debtors, cash and bank accounts.

What happens in case you fail to disclose some incomes?

The Annual Information Statement (AIS), which collates your financial transactions, can be handy in preventing such mistakes, still, you need to be careful while filing your tax return. In case the income tax department detects any source of income missing, you will receive a notice.

What is Section 44AD and are you allowed a deduction for expenses under Sections 30 to 38?

Section 44AD is applicable to professionals, business and partnership firms. As per Section 44AD, small taxpayers are exempted from maintaining account books only if their profits are less than Rs 2 crore. Also, according to presumptive income under Section 44AD,  you can declare gains at a prescribed rate.
In addition, if the income is credited through a bank or digitally, profits will be considered as 6% as opposed to 8% for cash receipts. 
If you adopt presumptive taxation under Section 44AD, you are not allowed a deduction for expenses under Sections 30 to 38.

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

  1. There are no major changes in ITR 4 as compared to last year.
  2. 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’.
  3. 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.
  4. Schedule DI that was inserted for AY 2020-21 has been removed.

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

  1. 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.
  2. 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.
  3. Return filed under section has been segregated between normal filing and filed in response to notices.
  4. 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
  5. In ‘Schedule BP’, gross turnover or gross receipts to include revenues from prescribed electronic modes received before the specified date.
  6. 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

  1. 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.
  2. Under Part A, the ‘Pensioners’ checkbox has been introduced under the ‘Nature of employment’ section.
  3. Return filed under section has been segregated between normal filing and filed in response to notices.
  4. Deductions under salary will be bifurcated into standard deduction, entertainment allowance and professional tax.
  5. 80G Deduction: The amount of Donation is bifurcated into cash and other modes.
  6. Separate Business details like Name of business, business code, and description for Section 44AD, 44ADA & 44AE.
  7. 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.
  8. Under GST  details the turnover text has been replaced by “Annual value of outward supplies as per the GST returns filed”. 
  9. ‘Deemed to be let out property’ option is now available under ‘Income from house property’.
  10. The taxpayers will be required to provide income-wise detailed information under the ‘Income from other sources’.
  11. A separate column is introduced under ‘Income from other sources’ for deduction u/s 57(iia) – in the case of family pension income.
  12. Section 80TTB column has been included for senior citizens.

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