ITR-4s is the best income tax return form for small businessmen and professionals. It is a small form which does not require the detailed information about the income and expenses. The ITR-4S (Sugam) is as easy for businesses as ITR-1 for the salaried.
ITR-4S the simplified version of the ITR-4. This form takes account of the presumptive income. Unlike ITR-4, you are not required to give the details of your revenue, profit and expenses. Rather, Only the total revenue and estimated profit are enough to file income tax return.
Who Can use ITR – 4S
An individual or HUF can use the ITR-4s.
You should have the business or professional income. (Professional income from FY 2016-17). The business or professional income should be computed on the basis of section 44AD, 44ADA and 44AE of the income tax act. Your income can also include any of these.
- Income from Salary/ Pension
- Income from One House Property (excluding cases where loss is brought forward from previous years)
- Income from Other Sources (Excluding winning from Lottery and Income from Race Horses).
These 3 included income are the same which is eligible for income tax return form ITR-1.
To file income tax return through ITR-4S, you have to presume your total income after the loss, allowance, depreciation and deductions.
Further, in a case where the income of another person like spouse, minor child, etc. is to be clubbed with the income of the assessee, this Return Form can be used only if the income being clubbed falls into the above income categories.
Who can’t Use ITR-4S
You can’t use the ITR-4S if your total income includes any of the following means.
- Income from more than one house property.
- Income from winnings from lottery or income from race horses.
- Income chargeable to tax under the head “Capital Gains”.
- Agriculture income of more than Rs. 5,000.
- Income from speculative business and other special incomes.
- Income from agency business or income in the nature of commission or brokerage.
Along with the above restriction on income source. The ITR-4S is also not available to these taxpayers.
- Who claims relief under section 90, 90A and/or section 91.
- Who has any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India.
- Any resident having income from any source outside India.
The Rule of Presumptive Taxation
Under income tax rule (section 44A/44AB ), every business has to maintain the book of accounts. It has to get it audited by the CA. Also, every business is required to pay advance tax.
The profit of a business is calculated by subtracting all the expenses from the revenue. It means you have to keep the records of all the expenses and income. Be it the light bill, snacks or sanitation expense. Well, it is really a pain to maintain a book of accounts.
The presumptive taxation scheme under section 44AD and 44ADA gives you freedom from this pain. You don’t need to maintain books of account. You don’t need to get it audited. Even, you are not required to pay quarterly advance tax.
The presumptive taxation rule considers 8% of the total revenue as the profit. You can count profit as 8% of the revenue without the actual calculation.
Similarly, For professionals, the presumptive profit is 50%. It means a professional can show 50% of his/her revenue as the presumptive profit.
The Advantage of ITR-4S
- The form is quite small. It has only 3 pages.
- You can use ‘Quick efile’ for ITR-4S. It is a fast way of efiling income tax return. In this method, you are not required to download the form. You can fill all the details online. Besides ITR-4S, only ITR-1 has got this facility.
- You are not required to maintain books of account.
Rule For Multiple Businesses
It is not mandatory to go for the presumptive taxation or ITR-4S. You can opt for ITR-4 any time. But, You must maintain proper accounts for this non-presumptive taxation.
Structure of ITR-4S
Part B: Gross total income from the five heads of income
Part C: Deduction and total taxable income
Part D: Tax computation and tax statusAlong with these basic parts of the income tax return. This form also requires some basic information about your business. You have to give these details in the following ‘schedules’.
Schedule BP – Details of income from Business. The following information is required in this schedule
Computation of presumptive income under 44AD. In this section, you have to give details of your business which is eligible for presumptive taxation under section 44AD.
Computation of presumptive income under 44AE. In this section, you have to give details of your business which is eligible for presumptive taxation under section 44AE. The section 44AE contains rules of presumptive taxation for the transport business.
Note – Till the writing of this article, we don’t have the ITR-4S for the FY 2016-17. Thus, there is no field for the section 44ADA.
Financial Particulars of the Business – To keep the income tax department informed about the real situation of your financials, you have to give details of the loan and advances.
There is a new section for the asset and liability. You have to give details of your asset and liability in this section if your income exceeds ₹50 lacs. This section can be found in various ITR form.
Like ITR-1, you have to also give details of your tax payment. It has 4 different schedules.
Schedule-TCS: Statement of tax collected at source.
Schedule TDS1: Statement of tax deducted at source on salary.
Schedule TDS2: Statement of tax deducted at source on income other than salary.
How to eFile ITR-4S online
- The personal details page is exactly similar to the ITR-1. This page has some basic information already. You have to give you email, address and mobile number.
- In the ‘filing status’ section you have to mention whether you are filing an original return or revised.
If you want more detailed instruction on this page, you can refer to my tutorial of efiling ITR-1. I have given all the instruction with screenshots.
- The income details page is also exactly similar, except the first source of income. In the ITR-4s form, the first source of income is your business income. All other fields are exactly same.
- The next tab is for those who has their income from transport business and want to enjoy presumptive taxation benefit under section 44 AE.
- The page for BP (Tab ‘BP’) has the unique section for presumptive business. It has sections for all type of presumptive income. You can have presumptive income from more than one businesses. They may be from different types of businesses or one type.
- In the beginning of this page, you have to tell about the nature of your business. There is a drop-down list of various businesses. Choose one from them. If you don’t find your business in the list, choose ‘other’. In the next three fields, you have to specify the 3 main activities of your business. Suppose, I am in the publishing business then my three main activities would be designing pages, writing content and printing the book or pamphlets.
- In the ‘Schedule BP’, you have to tell about the income from your business.
- The first section is for the business which is eligible for presumptive taxation under section 44AD. You don’t need to give the exact amount. You can give the estimated amount. But, there should not be under-reporting of turnover. It should be near about the truth.
- In this section, You have to mention your total turnover of the business. There is nothing to worry. Only two numbers are required. The first is the gross turnover. It is the value of your total sales or revenue during the financial year. The second number is your profit. It is the amount which you get after deducting all the expenses (Including raw material cost) from the revenue. This amount can be anything over the 8%. But the profit can’t be less than 8% if you want to fill the form ITR-4S. So, If your profit is less than the 8% then follow the auditing rules and use the ITR-4.
- You would find two sections for giving gross turnover and profit. The first is for the business which comes under section 44AD. The second is for the section 44AE (transport business ). From the FY 2016-17, there would be a third section for the profession.
- The next page of ‘Tax Details’ is like the ITR-1. You have to report about the taxes paid by you. It may be TDS, TCS or advance tax. If you face any difficulty for this section, refer to my tutorial for ITR-1.
- There are 3 more pages in the form ITR-4S. These are Taxes paid and Verification, AL and 80G. The pages are the same as in the ITR-1.
- In the Page ‘Taxes Paid and Verification’ you would find about your tax liability or refund. You have to also mention about your bank accounts.
- The ‘AL’ page ask about your assets (Property, gold and vehicles) and liabilities (Loan against mentioned properties). You have to give these details only if your annual income exceeds ₹50 lacs.
- The 80G page asks about your donations and charity. Certain donations and charity are eligible for tax deduction. You must fill this page if you have donated any amount. It would save the tax.
The eFiling of ITR-4S is as easy as ITR-1. After filling the form, you have to submit the form. After the submission, you have to verify the form.
Earlier the verification was done by sending the ITR-V. The ITR-V is produced after the form submission. You have to take print of this form, sign it and send to the CPC.
Now you can eVerify the income tax return form. You can do it immediately.
With the verification the process of efiling ITR-4S completes. You would get the acknowledgement into the mailbox. After few months, you would also get the Intimation of income tax return. You would also get income tax refund if any.