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As the tax season approaches, individuals and businesses in India gear up to file their income tax returns. The process can be a bit more intricate for taxpayers with business income or professional earnings. The Income Tax Department offers specific Income Tax Return (ITR) forms tailored to various income sources to ensure accurate reporting and compliance. Among these, ITR 3 and ITR 4 are commonly used by individuals with business and professional income. This blog will explore the differences between ITR-3 and ITR-4 to help you choose the right form for a hassle-free tax filing experience.
ITR is designed for individuals or Hindu Undivided Families (HUFs) with income from a business or profession. This form applies to taxpayers whose income falls under the following categories:-
Due Date for Filing ITR-3
ITR-4, also known as “Sugam”, is specifically meant for individuals, HUFs and firms (other than LLPs) who have chosen a presumptive taxation scheme under section 44AD, Section 44ADA or Section 44AE of the Income Tax Act. Taxpayers eligible for ITR-4 include:-
Note: Freelancers like bloggers, content writers, digital marketers, etc., can also file ITR-4. The due date for filing ITR-4 for Assessment Year 2023-24 is 31st July 2023.
Small business owners having a turnover not exceeding INR 2 crore can opt to pay tax under the presumptive scheme. Under section 44AD1, taxpayers can declare 6% or 8% of the turnover as income and are not required to maintain books of accounts.
Professionals having yearly receipts of up to INR 50 lakhs are eligible to declare 50% of such receipts as income. Tax will be computed on such declared income. Professionals who have availed of the presumptive scheme under section 44ADA are:-
A taxpayer involved in the business of plying, hiring or leasing goods carriages can prefer to pay tax under Section 44AE if he doesn’t own more than 10 goods carriages at any time during the year.
Selecting the correct Income Tax Return is crucial for accurate tax filing and reporting. If you have income from a business or profession but do not fall under the presumptive taxation scheme, ITR 3 is the appropriate form. On the other hand, if you have opted for a presumptive taxation scheme and meet the prescribed turnover limits. ITR 4 is the form you should use. As tax laws and rules are subject to change, it is advisable to consult a qualified tax professional or refer to the Income Tax Department’s latest guidelines to ensure compliance with the most up-to-date regulations. Filing the correct ITR form will save you time and effort and help you avoid potential tax penalties and discrepancies in your tax return.
ITR 3 applies to individuals and HUFs having income from business or profession, whereas ITR 4 applies to those opting for a presumptive taxation scheme.
No, ITR-4 does not have the option of capital gains. So if any individual or HUF has capital gains, then he has to file ITR-3.
No, an individual having income from salary, house property or other sources exceeding INR 50 lakh cannot use ITR-4.
ITR-4 applies to resident individuals, HUFs and firms, excluding LLPs who choose the presumptive business option and have a total income of INR 50 lakhs or less.
ITR-3 is mandatory for those not eligible to Form ITR-1, ITR-2 or ITR-4.
You can select ITR 1 when you derive income from salary, rent and interest. In contrast, you have to select ITR-4 if you derive income from salary, rent and interest and have chosen the presumptive business income.
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