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Unfolding ITR-4 and its eligibility criteria

Updated: Jun 20, 2023

Tax compliance can seem like a daunting task! But if you take it to step by step at a comfortable pace, you will find it easier to remember and connect the various aspects of taxation. By improving your ability to retain information, you will get better equipped to understand different areas of taxation. In this blog, we will cover ITR-4, including its components, what to do and what not to do, and who is eligible. Join me to learn more!

ITR-4 is eligible for filing by a resident individual / HUF / Firm (other than LLP) who meets the following conditions:

• Has total income not exceeding ₹50 Lakh during the Financial Year • Has income from Business and Profession that gets calculated on a presumptive basis under sections 44AD, 44ADA or 44AE • Has income from Salary or Pension, one House Property, Agricultural Income (up to ₹ 5000/-) • Other sources of income • Interest from Savings Account • Interest from Deposits (Post Office, Bank, or Cooperative Society) • Interest from Income Tax Refund or Family Pension • Interest received on enhanced compensation or any other interest income Please note that the income from certain sources, such as winnings from Lottery, and Income from Race Horses are not included in the eligible sources of income for ITR-4.

Individuals or Hindu Undivided Families (HUF) or firms (excluding Limited Liability Partnerships) are not eligible to file ITR-4 if they are:

• Resident Not Ordinarily Resident (RNOR) or non-resident Indians (NRIs) • Earning total income over ₹50 lakh • Earning agricultural income above ₹5,000 • A director in a company • Earning income from more than one house property or income from sources such as winnings from the lottery, race horses, or taxable at special rates under Section 115BBDA or Section 115BBE • Holding any unlisted equity shares at any time during the last year • Owning deferred income tax on Employee Stock Option Plan (ESOP) received from an employer who is an eligible start-up • Not meeting the eligibility criteria for filing ITR-4.

To file ITR-4, prepare the following documents as applicable:

1) Form 16 2) Form 26AS & AIS 3) Form 16A 4) Bank Statements 5) Housing Loan Interest Certificates 6) Donation receipts 7) Rental Agreement 8) Rent Receipts 9) Investment premium payment receipts such as LIC, ULIP, etc. The presumptive taxation scheme under Sections 44AD, 44ADA, and 44AE of the Income Tax Act allow small taxpayers to declare income at a prescribed rate, relieving them from compliance burden.

ITR-4 users can adopt the following presumptive taxation schemes:

1) Section 44AD: For taxpayers (resident individuals, resident HUF, or resident partnership firms) engaged in certain businesses 2) Section 44ADA: For resident individuals engaged in professions mentioned in Section 44AA (1) 3) Section 44AE: For taxpayers engaged in the business of plying, leasing, or hiring goods carriages owning up to ten goods carriages Section 44AD does not apply to businesses engaged in plying, hiring, or leasing goods carriages, any agency business, income in the form of commission or brokerage, or whose total turnover exceeds ₹2 Crore. Additionally, those required to maintain books of accounts as per Section 44AA (1) are not eligible for the presumptive taxation scheme under Section 44AD. To continue benefiting from the presumptive taxation scheme, it's mandatory to follow it for the next five years. If you choose not to continue with it, the scheme won't be available to you for the next five years. For instance, let's say you used the presumptive taxation scheme for AY 2019-20, AY 2020-21, and AY 2021-22 but didn't opt for it for AY 2022-23. In this case, you won't be eligible to avail the benefits of the presumptive taxation scheme for the next five AYs (AY 2023-24 to 2027-28).

Who can make use of the presumptive taxation scheme as per Section 44ADA?

The presumptive taxation scheme according to Section 44ADA can be adopted by an Indian resident who practices one of the professions listed below and whose gross receipts for a financial year do not exceed ₹ 50 Lakh: 1) Legal 2) Medical 3) Engineering or Architectural 4) Accountancy 5) Technical Consultancy 6) Interior Decoration 7) Any other Profession, as per a notification by CBDT Note: The last date for submitting Income Tax Returns for the financial year 2022-23 (the assessment year 2023-24) is July 31, 2023 (tentatively). Fruitful, timely, and profitable taxation to you!


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