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Income Tax Return Filing Under ITR Form 4

ITR 4 is intended for Individuals or Hindu Undivided Family or Partnership Firm having income from presumptive business. It may be difficult for small business entrepreneurs to maintain books of account and consequently makes difficult to find how much tax is to be paid. To give relief to small taxpayers from maintaining proper accounting and auditing, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and 44AE of the Income-tax Act 1961 (as amended on Financial Budget, 2016), where tax is paid on an estimated basis.

The recent budget in 2016, has liberalised the presumptive taxation scheme by extending the turnover limit of small business firms to 2 Crore from 1 Crore. Also, professionals who were kept out of the scheme were included in the recent budget, limiting them with receipts of less than Rs. 50 lacs. However, this scheme is still not applicable to income from commission or brokerage, agency business, business of ply, hiring or leasing goods carriage.

A new provision is also brought in by the government into the scheme as one should file their returns under the presumptive scheme for at least 5 years in continuation, else shall lose tax benefits under this scheme.

Presumptive taxation scheme

Small taxpayers can file Income tax return under the scheme in two taxation schemes

  1. The presumptive taxation scheme of section 44AD
  2. The presumptive taxation scheme of section 44AE

Eligibility Criteria

  1. presumptive taxation scheme of section 44AD
    1. Resident Individual
    2. Resident Hindu Undivided Family Firm (not Limited Liability Partnership Firm)
    3. Resident Partnership
  2. The presumptive taxation scheme of section 44AE
  3. Plying, hiring or leasing of goods carriages, who own a maximum of 10 goods vehicles at any time during the year.
Apart from the above, under 44AD, the recent budget has find provisions to include professionals to get the benefit of the scheme and is modified as section 44ADA.
  1. Eligibility Criteria under 44 AD

A person resident in India engaged in the following professions can take advantage of presumptive taxation scheme of section 44ADA:-

1) Legal

2) Medical

3) Engineering or architectural

4) Accountancy

5) Technical consultancy

6) Interior decoration

7) Any other profession as notified by CBDT

General Eligibility Criteria

  1. One should file their returns under the presumptive scheme for at least 5 years in continuation
  2. Total turnover or gross receipt of the business does not exceed Rs. 2 Crores

Income Computation

As per the scheme, the total income or the business income computed in normal provisions are as follows:

  1. Under 44AD, income is computed on a presumptive basis, i.e., @ 8% of the turnover or gross receipts of the eligible business for the year.
  2. Under 44ADA, income will be computed on a presumptive basis, i.e. @ 50% of the total gross receipts of the profession.
  3. Under 44AE, income will be computed @ Rs. 7,500 per month per vehicle.

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