The current version of ITR-4 is tailored for individuals and business owners with straightforward financial record-keeping practices. The ITR-4 form is designed to accommodate a range of individuals and businesses with diverse income sources and reporting requirements.
What is ITR-4?
ITR-4 is designated for taxpayers who opt for the presumptive income scheme as per Sections 44AD, 44ADA, and 44AE of the Income Tax Act. However, if the business's turnover exceeds Rs. 2 crore, then taxpayers are obligated to use ITR-3.
Who Needs to Submit ITR-4?
ITR-4 is meant for individuals, Hindu Undivided Families (HUFs), and partnership firms whose total income for the Assessment Year 2020-21 falls into the following categories:
Business income is calculated under Section 44AD or 44AE.
Income from a profession is computed under Section 44ADA.
Salary or pension with an income of up to Rs. 50 lakh.
Income from one house property with an income of up to Rs. 50 lakh (excluding cases with brought forward losses or losses to be carried forward).
Income from other sources with an income of up to Rs. 50 lakh (excluding winnings from lotteries and income from horse racing).
Note: Freelancers engaged in the above-mentioned professions can also utilize this scheme if their gross receipts do not exceed Rs. 50 lakh.
Notable Changes in ITR-4 for Assessment Year 2023-24
The ITR-4 form for the fiscal year 2022-23 has introduced several significant changes:
New Questions: The updated ITR-3 includes new questions to determine whether you had previously opted out of the new tax regime.
Income from Crypto and VDAs: A new schedule called VDA is introduced to separately report income from cryptocurrencies and other virtual digital assets (VDAs). If you treat income from VDAs as capital gains, you must provide a quarterly breakdown of the sales and purchases of VDAs. In the new ITR-3, every VDA transaction needs to be reported along with the sale and purchase dates.
Intraday Trading: Turnover and income from intraday trading must now be reported under the newly added section 'Trading Account.'
Balance Sheet Reporting: In terms of balance sheet reporting, advances received from individuals specified in Section 40A(2)(b) of the Income Tax Act and others must be reported under the 'Advances' category within the Source of Funds.
FII/FPI Disclosure: Foreign institutional investors (FII/FPI) are now required to provide their SEBI registration number as an additional disclosure measure.
These changes aim to provide a more comprehensive and detailed view of a taxpayer's financial activities, offering clarity and transparency in income reporting.
Tax & Process
You have two options for submitting your ITR-4 Form:
Offline Submission: You can file your ITR offline by providing a physical paper form or a bar-coded return. In return, you'll receive an acknowledgment issued by the Income Tax Department. Offline filing is applicable under the following conditions:
a) If you are 80 years old or older.
b) If your income is less than Rs. 5 Lakh.
Online Submission: Alternatively, you can file your ITR online by completing a digital form with a digital signature and then verifying the return using Return Form ITR-V. After submission, you'll receive an acknowledgment at your registered email address. Another method for submitting the form is by manually downloading it from the official Income Tax website. Then, you need to complete and sign the form and send it to the Income Tax Department's CPC office in Bangalore within 120 days of e-filing.
Is a Balance Sheet Required for ITR 4 Filing?
No, you don't need to disclose the details of your balance sheet when filing ITR 4.
What Does "Cash in Hand" Mean in ITR 4?
In ITR 4, you only need to disclose assets that are used in your business operations. Personal assets, including cash in hand, do not need to be included. You can indicate "Nil" (Zero) for sundry creditors, inventories, and cash in hand without causing validation errors when filing your returns.
Can I Convert ITR 1 to ITR 4?
Yes, it is possible to switch from Form ITR 1 to ITR 4.
What Does "Inventory" Mean in ITR 4?
Inventory refers to assets held by a business, which can include finished goods, work in progress, and raw materials that are kept for future sales. It also includes purchased goods held for resale, as well as maintenance supplies and consumables used in the production process.
Are Doctors Eligible for ITR 4?
Certainly, doctors have the option to file ITR 4 when they choose the presumptive scheme. They can even declare profits higher than 50% of their receipts. However, if their receipts are less than Rs. 50 lakhs and their expenses are below 50% of their receipts, they can benefit significantly from this scheme in terms of tax savings.