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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. 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.
Budget 2023 has amended Sec 44AD and Sec 44ADA to revise presumptive taxation limits for FY 2023-24 (AY 2024-25) as follows:
|Sec 44AD: For small businesses
|Sec 44ADA: For professionals like doctors, lawyers, engineers, etc.
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.
However, if the turnover of the business mentioned above exceeds Rs.2 crore, the taxpayer will have to file ITR-3.
ITR-4 is to be filed by the individuals/HUF/Partnership firm whose total income of AY 2020-21 includes as below:
Note: Freelancers engaged in the above profession can also opt for this scheme if their gross receipts don’t exceed Rs 50 lakh.
Below changes are incorporated in the ITR-4 form of the FY 2023-24:
ITR-4 is divided into parts as mentioned below:
PART A: General Information
PART B: Gross total income from the five heads of incom
PART C: Deduction and total taxable incom
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.
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 11: Now let us move to the Income Sources section. First up is salary. It may not be applicable in your case if you have business or profession income. Then there is ‘Rental or house property Income’ and ‘Other Income’. ‘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.
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. We have a video on ITR-2 live demo where we’ve explained how to fill up the capital gains section in detail. You can click on the ‘i’ button or check for the link in the description box below.
Step 12: 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
Step 13: 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 14: 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 15: 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 16: 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 17: Now scroll down, and you’ll see the other disclosures tab. If any of these conditions apply to you, then enter those details.
Step 18: 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 19: Once done, don’t forget to e-verify your return and collect exclusive rewards from over 50+ brands!
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.
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.
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.
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.
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.
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.
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.
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.
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.
The income of the professionals opting for this scheme would be assumed at 50% of the total gross receipts for the year.
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:
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.
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.
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.
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.
No, if a person is paying tax @ 8% as per section 44AD then he cannot claim depreciation or any other expenditure.
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.
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.
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.
The below changes are incorporated in the ITR-3 form of the FY 2022-23:
The following are the key changes introduced in the ITR-4 Form for the assessment year (AY) 2022-23:
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
4. What is ITR 3 Form & How to File ITR-3
5. What is ITR-5 Form, Structure & How to File ITR 5
6. ITR 6
7. How to File and Download ITR-7 Form
8. ITR 3 vs ITR 4
9. ITR 1 vs ITR 4
10. How to File ITR-2 for Income from Capital Gains FY 2022-23
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