ITR-4

For filing returns, the Income Tax Department has set out different forms. These forms are filed by the taxpayers as per the category that they fall under and the source of their income. There are multiple criteria that decide eligibility of a taxpayer to file a particular ITR form. Form ITR-4 is used for filing Income Tax Return by those taxpayers who have opted for the presumptive income scheme under Sections 44AD, 44ADA and 44AE of the Income Tax Act, 1961. This is, however, subject to the business turnover limit of INR 2 crores, exceeding which the taxpayer would be required to file ITR-3. Presumptive Taxation scheme is a scheme that exempts the small taxpayers from maintenance of books of accounts.

Who all are eligible to file Form ITR 4?

Ø  Form ITR-4 is required to be filed by those individuals whose income comes from the following sources:

• Business Income under Section 44AD/Section 44AE
• Income from profession as per Section 44ADA
• Income up to INR 50 Lac from Salary/Pension
• Income up to INR 50 Lac from One House Property (does not include brought forward loss or loss to be brought forward under this head)
• Income from other sources up to INR 50 Lac (does not include winning from lottery or horse races)
• Form ITR-4 can also be filed by freelancers in case their income does not exceed INR 50 Lac

Who all are not required to file Form ITR-4?

Ø  Form ITR-4 cannot be filed by any individual who:

• Holds Directorship in a company
• Holds any unlisted equity shares at any time during the previous year
• Has assets/financial interest in an entity outside India
• Has signing authority in an account outside India
• Has income from a source located outside India
• Has profits from a business or profession which is not required to be computed under sections 44AD, 44ADA or 44AE, like income from speculative business, commission, brokerage, etc.
• Makes Capital Gains
• Has income from more than one house property
• Has income under the head “other sources” from winning lottery, horse races, income taxable at special rates u/s 115BBDA or 115BBE
• Has income which is to be apportioned in accordance with the provisions of Section 5A
• Has agricultural income exceeding INR 5,000
• Has any brought forward loss or loss which is to be carried forward under any income head
• Has loss under “income from other sources”
• Has a claim of relief under Sections 90, 90A or 91
• Has any deduction claim under Section 57 (except deduction relating to family pension)
• Has claim of tax credit which has been deducted at source in the hands of another person
• Has joint ownership in house property (inserted in AY 20-21)

What is the process of filing Form ITR-5?

Form ITR-5 may be filed by the taxpayer either offline or online.

Ø  Offline filing of the form may be done by:

• Furnishing bar-coded return
• Furnishing the return in physical paper form – at the time of physical submission of the return, an acknowledgement shall be issued by the Income Tax Department

Ø  Online filing of Form ITR-5 can be done by:

• Online furnishing of the return under digital signature
• Online furnishing of the return under digital signature

Presumptive Income and its Taxation

Small businesses usually do not have enough resources for maintaining proper accounts and calculating exact profit or loss. For this reason, the Income Tax Department has laid down simple provisions for computation of income tax of small business owners based on gross receipts of the business.

Features of Presumptive Taxation Scheme

• There is no requirement of maintenance of books of accounts
• The net income is estimated to be 8% of gross cash receipts. However, for payments received via digital mode, the net income is assumed to be 6% of such gross receipts.
• Deduction of any business expense against this income is not allowed.
• The business owner has to pay 100% Advance Tax by 15th of March. There is no need to comply with quarterly instalments of due dates of Advance tax (i.e. in June, Sep, Dec)