ITR-4 Applicability: A Detailed Guide for Taxpayers

Taxpayers who are operating a business and have chosen to use the presumptive taxation scheme under Sections 44AD, 44ADA, and 44AE of the act may file an ITR-4. Whether or not they receive a pay, they can use Form ITR-4 to file their taxes. Businesses can file their taxes using Form ITR-3 if they choose not to use presumptive taxation. After that, freelancers including bloggers, vloggers, and online content writers must submit the ITR-4 form. Additionally, this form must be filed by professionals whose income is calculated on a presumptive basis under sections 44AD, 44ADA, or 44AE, such as chartered accountants, physicians, lawyers, engineers, etc.

---

Table of Contents

What is ITR-4?

ITR-4 Applicability

When is ITR-4 Not Applicable

Understanding Presumptive Taxation

Key Updates in ITR-4 from AY 2025-26

Conclusion

Frequently Asked Questions

---

What is ITR-4?

The Income Tax Department has informed taxpayers that they can file tax returns using various ITR Forms, including ITR-1, ITR-2, ITR-3, and ITR-4, depending on the type of income they receive. For taxpayers with business income who choose to use a presumptive income scheme under Sections 44AD, 44ADA, and 44AE of the Income-tax Act of 1961, the Income Tax Return form is ITR-4.

ITR-4 Applicability

ITR-4 can be used by resident individuals, HUFs, and partnership firms with business or professional income if they choose to apply Sections 44AD, 44ADA, or 44AE for presumptive taxation. The requirements for eligibility to file an ITR-4 are listed below.

• Total income is up to Rs. 50 lakhs

• Income is earned from salary or pension

• Agricultural income up to Rs. 5,000

• Rental income from a single house property

• Income from other sources, such as family pension, dividend, and interest

• Business or professional income come under presumptive basis u/s 44AD, 44ADA or 44AE

• Capital Gains Income only u/s 112A, not over Rs.1.25 lakhs (without carry forward of capital losses)

When is ITR-4 Not Applicable

ITR-4 is not applicable in the following cases:

• A person whose entire income surpasses Rs. 50 lakhs.

• A person who serves as a director of a business

• This form cannot be used by a person who has invested in unlisted equity shares.

• The Income-tax Act mandates that an individual, HUF, or partnership entity keep the books of accounts.

• Non-residents and residents who are not typically residents (RNOR)

• People who have made money using the following methods: legal gambling, racehorses, lotteries, etc.

• A person owning multiple residential properties

• Long-term and short-term taxable capital gains

• Income from agriculture above Rs 5,000

• A resident who is a signing authority on any account located outside of India or who possesses assets (including a financial stake in any organisation) outside of India

• People claiming section 90/90A/91 exemption from double taxation or relief from foreign taxes paid

• Profits from Virtual Digital Assets (Cryptocurrency) People for whom Section 194N TDS has been withheld

Understanding Presumptive Taxation

Typically, businesses must keep complex books of accounts and compute profits in accordance with the applicable act restrictions. However, small businesses whose turnover hasn't exceeded specific guidelines are eligible for a relaxation. In certain situations, gains can be expressed as income on the ITR-4 and computed as a set proportion of turnover. This program exempts small enterprises from keeping thorough accounting records, which is intended to reduce the compliance load on them. The following section come under the presumptive taxation scheme:

Section 44AD: Small business owners can choose to pay taxes under a presumptive plan if their sales is up to Rs 2 crore or Rs 3 crore and 95% or more of their receipts are made digitally. Under Section 44AD, taxpayers are exempt from keeping books of accounts and may report 8% or 6% (in the case of online transactions) of the turnover as income. This solely applies to manufacturers and traders; it has no bearing on service providers or companies that fall under section 44AE.

Section 44ADA: Professionals may report 50% of their annual revenues as income if they total up to fifty thousand rupees (Rs. 75 lakhs starting in FY 2024–2025, when 95% or more of receipts are made digitally). On such disclosed income, taxes will be computed. The following professions are eligible under the presumption plan under section 44ADA:

• Accounting

• Company Secretary

• Architecture

• Interior decoration

• Legal

• Engineering

• Medical

• Information Technology

• Technical consultancy

• Film artists such as directors, producers, actors, singers, lyricists, cameramen, costume designers, editors, story writers, dialogue writers, etc.

• Authorised Representative, excluding a person carrying on an accountancy/legal profession or is an employee of the person represented

Section 44 AE: If a taxpayer does not possess more than ten goods carriages at any point throughout the year and is involved in the business of plying, renting, or leasing goods carriages, he may choose to use 44AE.

Key Updates in ITR-4 from AY 2025-26

Long-Term Capital Gains (LTCG) Reporting

Long-term capital gains (LTCG) from listed equities shares and equity-oriented mutual funds may now be reported by taxpayers under section 112A of the ITR-1, as long as:

• There are no brought-forward losses or losses to be carried forward under the capital gains section

• The total LTCG does not exceed Rs. 1.25 lakh

Prior to this modification, any capital gains had to be filed on ITR-2; now, more taxpayers with extremely minor LTCG can utilise the easier ITR-1 form.

Enhanced Deductions and Disclosures

In the e-filing portal, deductions under Sections 80C to 80U must now be chosen from a drop-down menu, and the precise clause or sub-section must be mentioned. This seeks to increase transparency and accuracy. For improved relief monitoring, Section 89A, income from retirement savings held overseas, now includes new fields.

Disclosure of Tax Regime Selection (Section 115BAC)

Although the new tax system is now the default for people, qualified taxpayers have the option to select the previous regime annually in the ITR. Taxpayers who chose not to participate in the new regime in AY 2024–2025 are required to either confirm their decision or make a modification for AY 2025–2026. Form 10-IEA acknowledgement data are required for first-time opt-outs in AY 2025–2026. Form 10-IEA is to be submitted prior to the return filing deadline.

Removal of Aadhaar Enrollment ID

It is no longer possible to use the 28-digit Aadhaar Enrolment ID. Only legitimate 12-digit Aadhaar numbers are now accepted in the field.

Another Column in the Schedule TDS

To indicate the section under which TDS is deducted, a new column has been introduced under Schedule-TDS Details.

Conclusion

Under the presumptive taxation structure, professionals and small firms can file taxes more easily with the ITR 4 (Sugam) form, a simplified tax return. It applies to anyone with incomes under INR 3 crore who choose to use Sections 44AD, 44ADA, and 44AE of the Income Tax Act, as well as Hindu Undivided Families (HUFs), partnership firms, and LLPs. If you are still unsure about the applicability of ITR-4 in your case, you can consult experts.

Frequently Asked Questions

What is ITR-4 (Sugam) Form?

The income tax return form ITR-4 (Sugam) is intended exclusively for taxpayers who have chosen to use the presumptive income scheme as outlined in Sections 44AD, 44ADA, and 44AE of the Income Tax Act.

Who is eligible to file ITR4 (Sugam) Form?

The presumptive income system under Sections 44AD, 44ADA, or 44AE is applicable to individuals, Hindu Undivided Families (HUFs), and businesses (but not Limited Liability Partnerships or LLPs) that choose to use it.

What is the Presumptive Taxation Scheme?

Small taxpayers can estimate their income at prescribed rates under the presumptive taxation method, which eases the strain of keeping detailed financial records and makes tax compliance easier. For qualified taxpayers, assistance is provided under Sections 44AD, 44ADA, and 44AE.

Who is eligible for the Presumptive Taxation Scheme under Section 44AD?

Subject to certain restrictions, resident individuals, resident Hindu Undivided Families (HUFs), and resident partnership firms (except from limited liability partnerships) involved in particular businesses may utilise this system to estimate their income.

Who can utilise the Presumptive Scheme under Section 44ADA?

Subject to certain restrictions, residents of India who work in professions listed in Section 44AA(1) may use this program to estimate their professional income.

What is the eligibility for the Presumptive Scheme under Section 44AE?

Individuals, HUFs, businesses, and other residents or non-residents involved in the operation of goods carriage leasing, hiring, or plying are all covered by this program. As long as they owned no more than 10 goods carriages in the preceding year, they can estimate their income under this plan.

What types of Income are not eligible for ITR 4 income tax filing?

Income kinds like as capital gains, lottery winners, earnings and gains from specific businesses, ownership and maintenance of racehorses, and more cannot be reported on the ITR 4 income tax form.

Can a taxpayer with a loss file ITR-4 (Sugam)?

According to the Income Tax Act, taxpayers who have specific kinds of losses, credits, or deductions are not permitted to file ITR-4 (Sugam).

Are there specific exemptions for professionals under ITR-4 (Sugam)?

Professionals are not specifically exempt from ITR-4 (Sugam). Nonetheless, it is intended for taxpayers who choose for the presumed income system, which might make professional tax computations easier.

Does ITR-4 have capital gain?

If the income from long-term capital gains under section 112A is less than Rs 1.25 lakh, an ITR-4 can be submitted. If we have other capital gains income, we are unable to file it. ITR-2 or ITR-3 can be filed by individuals and HUFs who have capital gains.

What is the penalty for late filing of ITR-4 (Sugam)?

Depending on the length of time, fines under section 234F for late ITR-4 (Sugam) filing can reach Rs. 10,000.

Can I file ITR-4 instead of ITR-3?

ITR-4 must be filed by taxpayers who have chosen to use presumptive taxation under Sections 44AD, 44ADA, or 44AE. Even those who are eligible to register under ITR-4 may file under ITR-3.

Can I revise my ITR-4 (Sugam) after filing?

If you find mistakes or omissions in the initial filing, you can amend your ITR-4 (Sugam) within the allotted time.

Can I file ITR 4 offline also?

Yes, you can only file your ITR 4 offline if

• You are an individual who is 80 years of age or older

• You are an individual who earns less than Rs. 5 lakh and is exempt from filing an income tax return refund claim.