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Sharanya Radhakrishnan Nair

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Navigating ITR 4: Unraveling Tax Complexity for Small Businesses

Who Files ITR-4?

This form caters to a specific crowd:

 

Individuals: With total income up to Rs. 50 lakh and income from business/profession computed under presumptive schemes like Section 44AD, 44ADA, or 44AE.

Hindu Undivided Families (HUFs): With similar income structure and total income within Rs. 50 lakh.

Firms (other than Limited Liability Partnerships): Also enjoying the comfort of presumptive income schemes and a total income ceiling of Rs. 50 lakh.

What's New in AY 2024-25?

The tax landscape is a dynamic beast, and this year brings a couple of noteworthy changes:

 

New Regime as Default: Buckle up, because the new tax regime with its simplified slabs takes center stage. You’ll automatically be filed under this regime unless you explicitly opt-out via Form 10-IEA.

Transparency Reigns Supreme: Get ready to spill the beans on your bank accounts! You’ll now have to disclose details of all your Indian bank accounts during the previous year.

Turnover limit: The turnover threshold limit for opting for the presumptive taxation scheme under Section 44AD has been increased from Rs. 2 crores to Rs. 3 crores by the Finance Act 2023, as long as cash receipts do not exceed 5% of total turnover or gross receipts for the previous year.In addition, Section 44ADA was amended to increase the gross receipts threshold limit from Rs. 50 lakhs to Rs. 75 lakhs, provided that cash receipts do not exceed 5% of total gross receipts for the previous year. To reflect these changes, ITR-4 has been updated to include a new column for reporting “receipts in cash” under Schedule BP

Cash Receipts in the Spotlight: Receipts exceeding Rs. 2 lakh for your business/profession will need your attention, as you’ll have to report them diligently.

Section 80CCH Makes a Debut: A dedicated section for donations made to the National Fund for Armed Forces Other Ranks Welfare Scheme awaits your contributions.

List of Documents required for filing ITR-4 :

You will need to keep the following documents ready (as applicable) to file ITR-4:

  1. Forms 16 
  2. 26 (AS and AIS)
  3. Form 16A 
  4. Bank Statements
  5. Housing Loan Interest Certificates
  6. Receipts for donations, rental agreements, and rent payments.
  7. Investment premium payment receipts—LIC, ULIP, etc.

 

The linking of Aadhaar and PAN is crucial. If your PAN is not linked to Aadhaar, you can still file your ITR, but your access to the portal will be limited. It is therefore advisable to link PAN and Aadhaar.

What is the presumptive taxation scheme for those filing ITR-4?

According to Sections 44AA of the Income Tax Act (1961), a person engaged in business or profession must keep regular books of accounts under certain conditions. To relieve small taxpayers of such compliance burdens, the Income Tax Act established the presumptive taxation scheme under sections 44AD, 44ADA, and 44AE. A person who uses the presumptive taxation scheme can declare income at a specified rate. The Act has outlined presumptive taxation schemes (for ITR-4 users) as follows: 

 

  • Section 44AD: Income is computed on an estimated basis for taxpayers who are Resident Individuals, Resident HUFs, or Resident Partnership Firms (other than LLPs) engaged in certain businesses under certain conditions.
  • Section 44ADA: Computation of professional income on an estimated basis for an assessee who is a resident of India and works in a profession specified in section 44AA (1), subject to certain conditions.
  • Section 44AE: Income is computed on an estimated basis for taxpayers (individuals, HUFs, firms (other than LLPs), or any other person, resident or non-resident) engaged in the business of plying, leasing, or hiring goods carriages and owning no more than ten goods carriages at any time in the previous year.

What is the Structure of ITR-4?

      • PART A: General information
      • PART B: Gross Total Income
      • PART C: Deductions And Taxable Total Income (Refer To Instructions For Deductions Limits As Per Income-Tax Act)
      • PART D: Tax Computations And Tax Status
      • SCHEDULE BP: Details Of Income From Business Or Profession
      • SCHEDULE IT: Details Of Advance Tax And Self Assessment Tax Payments
      • Schedule TCS: Details of Tax Collected at Source [As per Form No. 27D issued by the Collector(s)] 
      • SCHEDULE TDS-1: Details Of Tax Deducted At Source From Salary [As Per Form 16 Issued By Employer(S)] 
      • SCHEDULE TDS-2: Details Of Tax Deducted At Source On Income Other Than Salary [As Per Form No. 16 A Issued Or Form No. 16c Or Form No. 16d Furnished By Deductor(S)]

Filing Made Easy:

Here’s a roadmap to a smooth ITR-4 filing:

 

Gather your documents: Income proofs, bank statements, investment details, and proof of deductions, among others.

Download the ITR-4 form: Make sure you’re grabbing the latest version from the official website.

Fill it thoughtfully: Follow the instructions carefully, double-check your entries, and avoid any discrepancies.

Verify and submit: Once satisfied, verify the information using your Aadhaar or digitally signed PAN and hit submit!

Bonus Tip: Seeking professional help from a tax consultant can be a wise investment, especially if your financial picture is complex.

 

Remember, filing ITR-4 doesn’t have to be a taxing experience. By staying informed, organized, and utilizing the resources available, you can navigate the process with ease. So, embrace “Sugam” and file your ITR-4 with confidence!

Frequently Asked Questions on ITR-4

Individuals with business income are not eligible to switch regimes every year. Once you choose the new regime, you have a one-time option to switch back.

Brought forward losses from business/profession are not allowed in ITR-4.

The limit for eligible businesses has increased to Rs. 3 crore for AY 2024-25.

Yes, choose e-verification through Aadhaar or physical verification via ITR-V form.

Yes, if your total income is below Rs. 50 lakh and both incomes fall under eligible categories.

Yes, you can file a revised ITR-4 within the deadline to correct any errors or omissions.

Late filing attracts penalties ranging from Rs. 1,000 to Rs. 10,000 depending on the delay.

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