ITR-4 is the Income Tax Return form for taxpayers who opt for a presumptive income scheme under Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act. However, if the turnover of the business mentioned above exceeds Rs. 2 crore, the taxpayer will have to file ITR-3.

The current ITR-4 applies to individuals and HUFs, Partnership firms (other than LLPs), which are residents and whose total income includes:

  • Business income according to the presumptive income scheme under section 44AD or 44AE
  • Professional income according to presumptive income scheme under section 44ADA
  • Income from salary or pension up to Rs 50 lakh
  • Income from one house property, not more than Rs 50 lakh (excluding the amount of brought forward loss or loss to be carried forward)
  • Income from other sources having income not more than Rs 50 Lakh (excluding income from lottery and race-horses )

Please note that any individual earning income from the above-mentioned sources as a freelancer can also opt for a presumptive scheme if their gross receipts are not more than Rs 50 lakhs.

A presumptive income scheme under sections 44AD, 44AE and 44ADA is when an individual or an entity opts to derive its income on a presumptive basis, i.e. when the income is presumed at a minimum rate based on a percentage of gross receipts / gross turnover or based on ownership of commercial vehicles. However, if the business turnover exceeds Rs 2 crore, the taxpayer will have to file ITR-3.

Who cannot use ITR-4 Form?

  • If your total income exceeds Rs 50 lakh
  • Having income from more than one house property
  • Owning any foreign asset
  • If you have signing authority in any account located outside India
  • Having income from any source outside India
  • If you are a Director in a company
  • If you have had investments in unlisted equity shares at any time during the financial year
  • Being a resident not ordinarily resident (RNOR) and non-resident
  • Having foreign income
  • If you are assessable in respect of the income of another person in respect of which tax is deducted in the hands of the other person.
  • If in case payment or deduction of tax has been deferred on ESOP
  • If you have any brought forward loss or loss needs to be carried forward under any income head

Major changes in ITR-4 form in AY 2024-25

Below changes are incorporated in the ITR-4 form of the FY 2023-24:

  • The default tax regime has been changed to the new tax regime following amendments introduced by the Finance Act 2023 to Section 115BAC. For individuals, HUFs, AOPs, BOIs, and AJPs, the new tax regime now applies by default. Taxpayers who prefer the old tax regime must explicitly choose to opt-out. An individual filing ITR 4 must submit Form 10-IEA to opt out of the new tax regime.
  • ITR forms 4 has been updated to include a column for disclosing the amount eligible for deduction under Section 80CCH. Section 80CCH, was \introduced by the Finance Act 2023, allowing individuals enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after 01-11-2022 to claim a tax deduction for the total amount deposited in the Agniveer Corpus Fund.
  • The Finance Act 2023 has increased the turnover threshold limit for opting for the presumptive taxation scheme under Section 44AD from Rs. 2 crores to Rs. 3 crores, provided that receipts in cash do not exceed 5% of the total turnover or gross receipts for the previous year. Additionally, Section 44ADA was amended to raise the threshold limit of gross receipts from Rs. 50 lakhs to Rs. 75 lakhs, given that receipts in cash do not exceed 5% of the total gross receipts for the previous year. To reflect these changes, ITR-4 has been updated to include a new column for disclosing "receipts in cash" under Schedule BP. The definition of cash includes cheques or bank drafts that are not account payee.

What are the benefits of ITR 4?

ITR 4 form is submitted by taxpayers who file their income tax return under section 44AD of the Income Tax Act, 1961 to gain the benefits of presumptive taxation scheme. This scheme under section 44AD facilitates small scale businesses by saving them from the tedious task of maintaining their books and accounts.

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