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A comprehensive guide to understanding the ITR-4S Sugam Form
|UPDATE The ITR-4S return form has been discontinued from FY 2016-17 (AY 2017-18). Learn more about ITR-4 return form. If you’re looking to file an income tax return for FY 2021-22, continue reading.|
The Sugam ITR-4S Form is the Income Tax Return form for those taxpayers who have opted for the presumptive income scheme as per Section 44AD and Section 44AE of the Income Tax Act. However, if the turnover of the business mentioned above exceeds Rs 2 crores, the tax payer will have to file ITR-4. The due date of filing the ITR-4S form for the Financial Year 2016-17 is 31 July 2017.
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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 from such a business and find out how much tax you need to pay. 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
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 requirement of the audit is only applicable to the business to which this scheme applies.
For other 2 businesses which are not covered under this section – the accounting records have to be made and audit is also required. Similarly, 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 for.
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. The scheme cannot be adopted by the taxpayer, if he has claimed deduction under section 10, 10A, 10B, Section 10BA, or Section 80HH to 80RRB in the relevant year.
Eligibility Criteria for this SchemeTo be eligible for this scheme:
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 this scheme. But this method of income computation is NOT applicable to:
These are the professions listed under section 44AA(1). Devesh runs a medical shop in his colony. The receipts of his business are Rs 1,50,00,000 in the financial year 2016-17. 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 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 case of a partnership firm, the 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. Rohit runs a kiryana 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 refrigerators and a computer with 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.
Ritesh runs a stationary shop and his turnover from this business are 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 VAT & Excise Duty. The receipts shall also include delivery charges as well as receipts from the sale of scrap. Discounts given, advances received and money received on sale of assets should be excluded.
For those who are in the business of plying, leasing or hiring of trucks a scheme similar to presumptive income scheme under section 44D is available. Features of this scheme
Here ‘Goods carriage’ means any vehicle used only for the carriage of goods. ‘Heavy goods vehicle’ means a goods carriage whose standalone weight (without loading goods) is more than 12,000 kgs. 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.
The relief of not maintaining accounting records & no requirement of the audit is only applicable to the business to which this scheme applies. For any other businesses which are not covered under this section – the accounting records have to be made and audit is also required. In case the taxpayer chooses to declare lower income than above, he shall have to maintain books of accounts and get them audited.
Eligibility Criteria : To avail this scheme
Deduction for Business Expenses: No business expenses are allowed to be deducted from the net income. Depreciation is also not deductible. However, in case of a partnership firm, 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. 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 installments. 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, include trucks which have been purchased on installments even if some installments 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 as mentioned above – he shall have to maintain books of accounts and get them audited.
The benefit of Presumptive tax rates were 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 does 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 Persons engaged in the following profession can opt for this presumptive Income scheme:
The scheme is applicable only to a resident assesse who is an individual, HUF or Partnership but not LLP (Limited Liability Partnership Firm).
No requirement of Maintenance of books of Account: Professionals opting for this scheme need not maintain books of account required to be kept under sec 44AA and also he need not get the books of account get audited under sec 44AB.
Deduction for Business Expenses: No business expenses are 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 as mentioned above – he shall have to maintain books of accounts and get them audited.
A simple table to understand at a glance, the provisions of Sections 44AD, 44AE and 44ADA
|Particulars||Section 44AD||Section 44AE||
|Eligible taxpayer||Resident Individual, Resident HUF, Resident Partnership firm (excludes LLPs) and Who has not claimed any profit linked deductions (i.e., Section 10A, 10AA, 10B, 10BA) and deductions under Section 80HH to 80RRB||Any taxpayer who owns not more than 10 goods carriages at any time during tax year “Owns” also means goods carriage taken on hire or installment where the amount payable is still due||Resident taxpayer|
|Eligible business/ profession||Any business other than business covered under Section 44AE||Business of plying, hiring or leasing of goods carriages||Legal, medical, engineering or architectural, accountancy profession, technical consultancy, interior decoration or any other profession notified by the Board in the official gazette|
|Monetary threshold||Total turnover or gross receipts not exceeding Rs 2 crores||Not applicable||Total gross receipts not exceeding Rs 50 lakhs|
|Prescribed / presumptive income||
||Rs 7500 per goods carriage for every month or part of the month during which the goods carriage is owned by the taxpayer in the tax year Or Amount claimed to be actually earned Whichever is higher||50% of total gross receipts in a tax year|
|Person specifically excluded||
||Not applicable||Not applicable|
|Payment of advance tax||Entire advance tax can be paid by last installment of advance tax i.e., 15 March of a year In case of failure to do so, interest is leviable @ 1% on shortfall as per Section 234C||No concession in payment of advance tax. Same shall be paid in four installments as per advance tax provisions||Entire advance tax can be paid by last installment of advance tax i.e., 15 March of a year In case of failure to do so, interest is leviable @ 1% on shortfall as per Section 234C|
Note: Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year ending on that day.
Clear Tax automatically selects the right ITR form when you e-file.
ITR-4S is divided into:
Schedule BP – Details of income from Business. The following information is required in this schedule Computation of presumptive income under 44AD Computation of presumptive income under 44AE Financial Particulars of the Business
You can submit your ITR-4S Form either online or offline. It is mandatory to file Income Tax Returns electronically (either through Mode 3 or Mode 4) for the following assesses:
The Income Tax Department will issue you an acknowledgment at the time of submission of your physical paper return.
If you submit your ITR-4S Form electronically under digital signature, the acknowledgment will be sent to your registered email id. You can also choose to download it manually from the income tax website. You are then required to sign it and send it to the Income Tax Department’s CPC office in Bangalore within 120 days of e-filing. Remember that ITR-4S is an annexure-less form i.e. you do not have to attach any documents when you send it.
We have a guide to help you print and send your ITR-V to the CPC office. Read our Guide