Selecting the appropriate Income Tax Return (ITR) form is essential while submitting income taxes in India. Out of all the other ITR forms that are accessible, ITR 4 Filing is specifically made for a particular type of taxpayer. A seamless tax filing process and correct compliance can be ensured by being aware of the differences between ITR 4 and other forms.
ITR 4: What Is It?
Individuals, Hindu Undivided Families (HUFs), and businesses (except from limited liability partnerships) that have chosen the presumptive income scheme under sections 44AD, 44ADA, or 44AE of the Income Tax Act are the target audience for ITR 4, often referred to as Sugam. For professionals, transporters, and small business owners, this form makes tax filing easier.
Important Distinctions Between Other ITR Forms and ITR 4
1. Scheme for Presumptive Income
ITR 4 is intended for taxpayers who choose presumptive taxation, in which income is reported as a fixed percentage of gross revenues or turnover, as opposed to ITR 1, ITR 2, or ITR 3. Maintaining thorough books of accounts is no longer necessary as a result.
2. Target Audience
ITR 1: People who are salaried and make up to ₹50 lakh.
ITR 2: For people having overseas assets or capital gains.
ITR 3: For people or HUFs who don’t choose presumptive taxes and have business or professional income.
ITR 4: For professionals, small enterprises, and carriers subject to presumed taxation.
3. Time Efficiency and Simplicity
Compared to forms like ITR 3, which need comprehensive disclosure of profit and loss, balance sheets, and other financials, ITR 4 filing is much easier and faster. Presumptive income declaration is permitted under ITR 4, which reduces paperwork and filing time.
4. Professional and Business Income
ITR 4 is utilized when such income is disclosed as a presumptive percentage, whereas ITR 3 is appropriate for business and professional income based on real accounts. For freelancers, small business owners, or shopkeepers who don’t want to keep thorough records, this is perfect.
5. Income Restrictions
Only when total income is less than ₹50 lakh and business or profession-related gross receipts or turnover are less than ₹2 crore (for 44AD/44AE) or ₹50 lakh (for 44ADA) can ITR 4 be used.
6. Criteria for Exclusion
ITR 4 cannot be filed if
You own multiple homes and properties.
You serve as a director for a business.
You have assets or income from overseas.
You own stock shares that are not listed.
Other ITR versions, such as ITR 2 or ITR 3, are suitable in certain circumstances.
Advantages of Filing ITR 4 with Less Documentation: There is no need to create profit and loss statements or balance sheets.
Reduced Compliance Burden: Presumptive schemes make it easier to file and do not require audits.
Perfect for Small Taxpayers: Professionals with steady incomes and small enterprises are the best candidates.
In conclusion
For qualified professionals and small business owners, ITR 4 Filing provides a streamlined method of tax compliance. It offers a practical choice for individuals covered by the presumptive tax scheme, despite having substantial differences from other ITR forms in terms of eligibility, structure, and complexity. For smooth tax filing and to stay out of trouble with the law, you must select the appropriate ITR form according to your income type and structure.