ITR-4 Form is especially for those Individuals, HUFs and Firms (excluding LLPs) earning income from the source of Business/Profession and who are not required to maintain books of accountsas per section 44AA of the Act as they can declare their income on the basis of presumptive taxation scheme under Sections 44AD, 44ADA or 44AAE of the Income Tax Act, 1961.
To declare income on presumptive basis, turnover in case of business shall not exceed Rs. 2 Crore and turnover in case of profession shall not exceed Rs. 50 Lakh in a Financial Year. According to the Presumptive Taxation scheme, if the turnover of a business or profession exceeds the respective prescribed limit then such person shall be required to maintain proper books of accounts within the provisions of Section 44AA of the Income Tax Act, 1961 and such person shall file ITR Form-3.
The I-T department rolled out the scheme of Presumptive Taxation for small businesses and professions in order to save their limited resources, which are required to maintain proper books of accounts as per the provisions of section 44AA of the Act. Presumptive taxation helps to save time & money in case of small businesses / professions, as their respective income is calculated on the presumptive basis.
What Is ITR 4 Form?
ITR 4 means Income Tax Return Form 4 that is required to be filed by Individuals or HUF or firms having income from Business or profession.
Who can use Income Tax Return form 4 (ITR-4)?
- An individual or
- A Hindu Undivided Family (HUF), who is a resident other than not ordinarily resident, or
- A firm, other than a limited liability partnership firm, which is a resident
deriving “income under the head Profits or gains of business or profession” and
such income is computed in accordance with special provisions related to the Presumptive Taxation Scheme referred to in section 44AD, section 44ADA, and Section 44AE of the Act.
Who cannot use Income Tax Return form 4 (ITR-4)?
The proviso to Rule 12(1)(ca) provides that if the person is otherwise eligible for filing his return of Income, he cannot file ITR-4 (Sugam) if he-
(I) has assets (including financial interest in any entity) located outside India;
(IA) has signing authority in any account located outside India;
(IB) has income from any source outside India;
(IC) has income to be apportioned in accordance with provisions of section 5A;
(ID) is a director in any company;
(IE) has held any unlisted equity share at any time during the previous year;
(IF) has total income, exceeding Rs. 50 Lakh;
(IG) owns more than one house property, the income of which is chargeable under the head “Income from house property”;
(IH) has any brought forward loss or loss to be carried forward under any head of income;
(IJ) is assessable for the whole or any part of the income on which tax has been deducted at source in the hands of a person other than the assessee;
(II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91;[(III) has agricultural income, exceeding Rs. 5,000;
(IV) has income taxable under section 115BBDA (dividend income from a domestic company above Rs. 10 lakh); or
(V) has an income of nature referred to in section 115BBE (tax on undisclosed income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69)
Key points to remember while filing Income Tax Return form 4 (ITR 4 form)
- ITR-4 can be filed only by a resident Individual, HUF, or a firm (excluding LLP).
- Such persons are deriving income from business or profession.
- The income from business or profession is computed as per section 44AD, section 44ADA or section 44AE of the Income Tax Act, 1961.
These sections are known as the presumptive income scheme where no regular books of accounts are maintained.
Changes in Income Tax Return form 4 (ITR-4) for F.Y 2020-21/ A.Y 2021-22
Option to choose between Old Tax Regime and New Tax Regime – Section 115BAC of the IT Act
Through budget 2020, government has introduced new section 115BAC of the Income tax Act, giving option to Individuals and HUF taxpayers to pay income tax at lower rates as per new tax regime without claiming any deduction (Subject to certain Conditions).
From A.Y. 2021-22, option has been inserted in the Part-A of the ITR 4 and the Part A state that “are you opting for new tax regime under section 115BAC and then there are two options that are “Yes or No”.
If the person chooses “No” then the person can proceed further and pays taxes according to old tax slab & by claiming available deductions.
However, if the person chooses“Yes”, in such case heneeds to fileForm 10IE before filing ITR 4 as the date of filing ofForm 10IE along with the acknowledgment number, is required to be furnish in ITR 4.
Form 10IE is basically a declaration that is required to be made by the income tax return filers for opting the ‘New tax regime’
Dividend Income to be Taxable in the hands of recipient from A.Y. 2021-22
From this A.Y. 2021-22, the dividend income received by all the shareholders shall be taxable in the hands of shareholders only instead of Company. Correspondingly, the changes have been made in the ITR-4 form. Thus, the shareholders have to disclose total dividend income earned by them in F.Y. 2020-21.
No ITR-4 in case of Deferment of Tax on ESOPs
From A.Y. 2021-22, when a taxpayer’s deduction/payment of tax against the ESOPs has been deferred as per Rule 12 of the Income Tax Rules 1962 thensuch taxpayer cannot file ITR-4 or ITR-1. Subsequently, the required amendments have been made in the ITR-4 Form.
Schedule DI is deleted from A.Y. 2021-22
Due to pandemic of Covid19 entire country went into lockdown in March 2020 and therefore to help taxpayers a Schedule DI was notified for the A.Y. 2020-21. This schedule allowed a taxpayer to claim deduction or exemption for investments, payments and expenditure incurred during the period 1 April 2020 until 31 July 2020.
From A.Y. 2021-22, the Schedule DI has been deleted from all the ITR Forms.
No option to carry forward of TDS when deducted under Section 194N of the IT Act
No option to carry forward of TDS if deducted under newly introduced section 194N of the IT Act, which is otherwise available as per the provisions of section 199 read with rule 37BA
As per the provisions of section 199 read with rule 37BA of IT Rules, 1962, credit of TDS is available shall be given for the year wherein respective income is taxable. So, in case if the TDS has been deducted in current year and its income is taxable in next year, in such case assessee is allowed to carry forward the respective TDS and he should claim its credit in the year in which it’s respective income is taxable.
New section i.e. 194N has been introduced in Income tax Act, which is applicable from the assessment year 2021 – 22. According to this new section tax has to be deducted on amount of cash withdrawal from bank subject to certain conditions. Since, withdrawal of cash cannot be considered as income of assessee for any specific year, therefore Rule 38BA specifically states that for the purposes of section 194N, credit for TDS shall be given to assessee for the year in which such TDS has been deducted.
Therefore, it can be concluded that from AY 2021 – 22, applicability of provisions of section 199 read with rule 37BA of the Act is slightly different if TDS has been deducted under section 194N of the IT Act.
One point should be noted that if in case of a person TDS has been deducted under section 194N of the Act, in such case he cannot file ITR 1 for that assessment year, even if otherwise he was liable to file ITR 1 only. Moreover, the said change regarding restriction of carry forward of TDS if it is deducted under section 194N of the Act, has been made in all other ITR forms i.e. ITR 2 to ITR 7.
We hope all of your doubts related to ITR 4 means, how to file ITR 4 form, and other topics related to ITR 4 Filing are answered. In case of any query, contact your Trustworthy Advisors Manthan Experts.