Before the commencement of this article, we like to discuss one of the important doubt every taxpayer facing:
What is the difference between ITR – 4 and ITR – 4S
Income tax department for the business and professional income categories into two segments:
- If the turnover of the business or profession under 2 crores ITR Form 4 comes into play.
- If the turnover of the business or profession under 2 crore ITR Form 4S (who opted under the scheme as per Section 44AD and Section 44AE) is on the driving seat.
The ITR-4S return form has been discontinued from FY 2016-17 (AY 2017-18). If you’ve e-filed a ITR-4S for FY 2015-16, then you must file an ITR4 now.
Now the question is:
Who can file ITR 4s?
Still confused about section 44AD, 44ADA, 44AE?
What is section 44AD, 44ADA, 44AE under presumptive income?
Under presumptive income maintaining books is not mandatory, A person opting for presumptive income has to declare income on certain percentage and is relieved from maintaining books of accounts.
Any business turnover does not exceed 2 crores opt this scheme under section 44AD.
Before starting to fill ITR 4, prepare the checklist along with documents on the desk:
Checklist/documents for filing ITR 4
It is recommended to prepare a file (AY 2017-18) and keep all the relevant documents required for ITR IV.
- Copy of PAN card
- Bank account statement (all accounts)
- Adhar Card
- Advance tax payment details (challan 280)
- Form 26 AS
- Details of Income-tax deduction u/s 80C
Structure of filling ITR Form 4
Filling ITR IV online consist of the form with 8 pages with a different scenario which consist complete information required under income from business, profession, salary, house, and deduction under section 80C, tax paid etc.
Part A: General Information ITR IV
Part A, consist of general information like name, address, pan details, aadhar number, mobile number & email address & filling status.
A19: Tax status consists of three options:
- Tax refundable
- Tax payable
- Nil after balance
The taxpayer required to select one of the categories.
A21: Return filled under section – The selection of the correct option is very important, your selection treat your return that way.
“On or before due date u/s 139(1)” & “After due date 139(4) are self-explanatory.
Other then that return filled “u/s 142(1)”, “u/s 148”, “u/s 153A”, “u/s 153C r/w 153A”, “u/s 139(9),”Section 139 read with section 119 (2)(b) due to some reason mentioned in Income tax notice.
Part B: Gross total income from the five heads of income
This section in ITR IV is very important:
It is recommended to read this portion twice.
We will start with – “Income from the business & profession, the breakup is mentioned under “NOB BP”
Section NOB BP is a very important part of ITR IV, and also required full concentration of the taxpayers.
Starting with this portion initially, you have to select the nature of your business or profession.
This list consists of hundreds of business to select the right one, in which you are involved.
If you are involved with more then one business or profession, you can just click add button mentioned in red circle above to add another business.
It is also required to inject Tradename of your business or profession.
ITR IV allows the taxpayer to disclose their income in three schedules, which is bifurcated under:
- Computation of presumptive income under 44AD
- Computation of presumptive income under 44ADA (profession)
- Computation of presumptive income under 44AE
Before going further we will understand in detail about 44AD, 44ADA & 44AE.
What is the presumptive income under 44AD?
Section 44AD is introduced for the small business to simplify the taxation.
The taxpayers are not allowed to deduct any expenditure under this scheme.
Under this scheme the taxpayer required to pay 100% tax up to 15th of March of the financial year.
As per the amendment in FY 2017, the government of India encourages digital payment process for business and professions.
If the business received payment in a digital form (through account payee cheque, demand draft or any other digital form), In that scenario the taxpayers avail the benefit of 8% of the total turnover of the business.
If the business received payment in any other mode (the best example is cash), the taxpayers avail the benefit of 6% of the total turnover of the business.
What is the presumptive income under 44ADA?
Under this section taxpayer who is engaged in the prescribed profession activities having gross receipt up to Rs. 50 lakh in a financial year can avail this section and take benefit up to 50% of the gross receipt.
The professional business includes:
- Architectural profession
- Chartered Accountants/Company Secretary
- Technical consultancy (IT)
- Interior decoration
- Any other profession
This scheme allows taxpayers to do their profession without maintaining books of account.
Note:- If Income is less than 50% of gross receipts, it is mandatory to have a tax audit under 44AB and regular ITR 3 or ITR 5 form has to be filled.
What is the presumptive income under 44AE?
The Taxpayer who is engaged in the transportation business avail the benefit of 44AE.
Some provision u/s 44AE:
- The owner owns the vehicle will not exceed 10 vehicles at any time of the financial year.
- Under this scheme, ₹7500/- per month per vehicles is considered. If the income is higher then ₹ 7500/- per month there is no restriction to disclose it.
- If the income specified is less then ₹7500/- per month per vehicles, then the regular ITR 3 or ITR 5 to be filled.
- The taxpayer availing this scheme no need to maintain the books of accounts.
Form ITR IV consists of the separate 44AE section, the taxpayer required to fill the information in the above format. The Total amount carry forwarded to E5 – “Presumptive Income from goods carriage under section 44AE”.
Also Read: Advance Tax
Section E8 – Finally provided you the Total Income chargeable under business (u/s 44AD, 44ADA & 44AE).
After all that and filling in your correct information under “NOB BP”, the final taxable amount is automatically forwarded to income details form, which also includes salary income (B2) which should be filled as similar as ITR I, house property income (B3) and income from other sources (B4).
Below Figure is self-explanatory:
Part “C” of ITR IV includes all the deduction under “section 80”
Amount paid towards life insurance premia, contribution to Provident Fund, contribution to EPF, Post office Tax Saving Deposits, subscription to National Savings Certificates, deferred annuity, Child tuition fees, Repayment of Home Loan amount (Principal Amount)
Contributions paid for any annuity plan of Life Insurance Company or any other insurer, the amount paid will not exceeding ₹1,50,000/-.
Section 80CCD (1A)-
Contribution amounts paid or deposited under a national pension scheme (NPS) notified by Central Government, subject to upper limit of:-
- 10% of salary (Basic + DA), in the case of an employee.
- 20% of Gross Total Income in any other case.
However, the maximum deductions under section 80C, 80CCC and sub-section (1) of section 80CCD shall not exceed ₹1,50,000/-.
Deduction in respect of the amounts paid or deposited under a pension scheme notified by Central Government not exceeding ₹50,000/-.
Any amount under an employer‘s contribution to employees account under a pension scheme notified by the Central Government will not exceed 10% of employer salary.
The investment made under an equity saving scheme to the extent of 50% of the amount invested subject to maximum limit of ₹25,000/-.
Section 80D Income-tax Act – Tax benefit for (Health, Medical Treatment), medical expenditure incurred on self, family members or parent.
The maximum limit for claiming deduction under section 80D in various cases is as under:-
(A) Health Insurance Premium
- Self, Spouse, Dependent Children (aggregate)- ₹25,000/-
- Parents- ₹25,000/-
- Senior Citizen or very Senior Citizen- ₹30,000/-
(B) Medical expenditure in the case of a (super senior citizen) (above 80 years) where no amount has been paid for his health insurance
- On self (super senior citizen) – ₹30,000/-
- Parents (super senior citizen) – ₹30,000/-
- On self and parent (super senior citizen) – ₹60,000/-
(C) Preventive Health Check-up –
- Self and Family – ₹5,000/-
- Parents – ₹5,000/-
- Self & family & parents – ₹5,000/-
The taxpayer avails the tax benefit of expenditure made against disabled family member dependent on them. Deduction in respect of maintenance including medical treatment of the dependent who is a person with disability Maximum Limit for 80DD Deduction.
- General Disability —₹75,000/-
- Severe Disability —₹1,25,000/-
Deduction in respect of the amount paid for medical treatment of any specified disease. The maximum limit for claiming deduction under section 80DDB in various cases is as under:-
- General– ₹40,000/-
- Senior Citizen– ₹60,000/-
- Super Senior Citizen– ₹80,000/-
Deduction in respect of any amount paid for interest on the loan is taken for higher education by the assessee or his relative. There is no such upper limit prescribed u/s 80E.
Deduction under interest on loan taken by an individual for the purpose of acquisition of residential house property, The maximum limit for claiming deduction under section 80EE is ₹50,000/-.
Deduction in respect of donations to certain funds,
- Section A – Donations entitled for 100% deduction without qualifying limit
- Section B – Donations entitled for 50% deduction without qualifying limit
- Section C – Donations entitled for 100% deduction subject to qualifying limit
- Section D – Donations entitled for 50% deduction subject to qualifying limit
The maximum limit for claiming deduction under section 80G, if paid in cash is ₹2,000/-.
Deduction for rent paid for residential accommodation by the taxpayer in excess of 10% of his total Income, the maximum limit for claiming deduction does not exceed ₹5,000 per month or 25% of total Income.
The contribution made to the political party registered under 26A of the public act. No deduction, however, is allowed for contributions paid in cash. There is no such upper limit prescribed u/s 80GGC.
Deduction on income received under royalty or copyright of author of certain books. The maximum limit for claiming deduction under section 80QQB is ₹3,00,000/-.
Deduction in respect of income from royalty on patents, The maximum limit for claiming deduction under section 80RRB is ₹3,00,000/-.
The Maximum amount of ₹10,000/- is allowed to deduct in respect of interest on savings account deposits.
Deduction in case of certification by the medical authority as a disability.
- General Disability —₹75,000/-
- Severe Disability —₹1,25,000/-
Schedule AL (Assets and Liability) for ITR IV
Under this portion, the taxpayer required to disclose the details of immovable assets:
If the taxpayer does have the immovable assets, after selecting “yes” option, All the details required to enter like – address, area, town & amount.
The taxpayer inserts all the details by adding the clicking “ADD” button.
Under this schedule, the taxpayer required to disclose the details of movable assets also:
If the taxpayers have any interest held in the assets of the firm or association of person (AOP) as a partner and member thereof, ITR IV required to share the details in prescribed format:
After selecting “YES” you can fill the column.
Conclusion: ITR IV is another form popular among taxpayers followed by ITR I, for small business and professional. Section 44AD, 44ADA, 44AE help the taxpayers to get rid of the audit and bookkeeping process.