Taxpayers operating a business or profession who choose the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income-tax Act are eligible to file ITR-4. This includes individuals with or without salary income, as well as freelancers like content writers, bloggers, and vloggers. Professionals such as chartered accountants, doctors, lawyers, and engineers whose earnings are assessed on a presumptive basis also utilize this form.

Key Overview

• ITR-4 is designed for individuals engaged in freelancing and small businesses who opt for presumptive taxation.
• Taxpayers with capital gains income (excluding certain LTCG up to Rs. 1.25 lakhs) or businesses not under presumptive taxation are ineligible for ITR-4.
• Significant modifications have been implemented for the Financial Year 2024-25, necessitating new disclosures during the filing procedure.

The Income Tax Department has initiated the e-filing process for ITR-4 for Financial Year 2024-25 (Assessment Year 2025-26), allowing taxpayers to submit their returns electronically via the official Income Tax portal.

An Excel-based utility for downloading ITR-1 and ITR-4 is available here.

What is the ITR-4?

ITR-4 serves as the Income Tax Return form for individuals and entities electing the presumptive income scheme for business earnings, as outlined in Section 44AD, Section 44ADA, and Section 44AE of the Income-tax Act, 1961. The ITR-4 form for Assessment Year 2025-26 can be downloaded here.

What is Presumptive Taxation?

Normally, businesses are obligated to keep detailed accounting records and determine their profits in line with statutory regulations. However, a simplified approach exists for small businesses whose turnover remains below specific thresholds. Under this provision, profits can be computed as a predetermined percentage of their annual turnover and reported as income in ITR-4. This scheme aims to alleviate the regulatory burden on smaller enterprises by freeing them from the requirement to maintain extensive financial accounts.

The presumptive taxation framework encompasses the following sections:

Since profit is calculated as a fixed percentage of turnover, any expenses incurred during business operations cannot be separately claimed as deductions.

Who is Eligible to File ITR-4?

ITR-4 is to be filed by individuals, Hindu Undivided Families (HUFs), or partnership firms meeting the following criteria:

• Must be a Resident of India as defined by the Income Tax Act.
• Possesses business or professional income.
• Income from business is calculated under Section 44AD or 44AE.
• Income from profession is calculated under Section 44ADA.
• Includes long-term capital gains income up to Rs. 1.25 lakhs (provided there are no brought-forward or carry-forward capital losses).
• Should not have income from more than one house property.

Who is Not Eligible to File ITR-4?

Certain individuals and entities are specifically excluded from filing ITR-4:

• Individuals whose total income surpasses Rs. 50 lakhs.
• Individuals who hold a director position in a company.
• Individuals who have invested in unlisted equity shares.
• Individuals, HUFs, or partnership firms legally mandated to maintain books of accounts under the Income-tax Act, 1961.
• Residents Not Ordinarily Resident (RNOR) and Non-residents.
• Individuals whose earnings derive from sources like lotteries, racehorses, or legal gambling.
• Individuals possessing income from more than one house property.
• Taxable capital gains (both short-term and long-term).
• Agricultural income exceeding Rs. 5,000.
• Residents holding assets (including financial interests in any entity) outside India or having signing authority in any foreign account.
• Individuals claiming relief for foreign tax paid or double taxation relief under Section 90/90A/91.
• Gains from Virtual Digital Assets (Cryptocurrency).
• Individuals for whom TDS has been deducted under Section 194N.

What is the Structure of ITR-4?

The ITR-4 form is organized into several key parts and schedules:

• PART A: Contains general information about the taxpayer.
• PART B: Summarizes gross total income from all five income heads.
• PART C: Details deductions claimed and the total taxable income.
• PART D: Outlines tax computation and current tax status.
• Schedule BP: Provides income details from business under Sections 44AD, 44ADA, and 44AE.
• Information regarding turnover/Gross receipts reported for GST: Requires furnishing the GSTIN.
• Financial Particulars of Business: Lists assets and liabilities owned by the business.
• Schedule IT, TCS and TDS 1: Statement of advance tax payments, self-assessment tax, tax collected at source, and TDS from salary.
• Schedule TDS: Statement of tax deducted at source on income other than salary.
• Verification column: A declaration confirming the truthfulness of all furnished information, followed by the taxpayer's signature.

How to File ITR-4?

Step-by-Step Guide - File ITR-4 on the Income Tax Portal

To file ITR-4 through the official Income Tax e-Filing portal, follow these steps:

1. Access the Income Tax e-Filing portal.
2. Log in using your user ID (PAN), password, and captcha code, then click 'Login'.
3. Navigate to the 'e-File' menu and select the 'Income Tax Return' link.
4. Click 'Continue' to proceed.
5. Carefully read the instructions and accurately fill in all necessary and mandatory fields within the online ITR form.
6. In the 'Taxes Paid and Verification' tab, choose the appropriate verification option.
7. Select one of the following methods to verify your income tax return:
   • "I would like to e-verify"
   • "I would like to e-verify later within 30 days from the date of filing."
8. Click the 'Preview and Submit' button to review all entered data in the ITR.
9. 'Submit' the ITR.
10. If you chose the 'I would like to e-Verify' option, complete the e-Verification using any available method by entering the Electronic Verification Code (EVC) or One-Time Password (OTP).

Major Changes in ITR-4 Form from AY 2025-26

Inclusion of Long-Term Capital Gains (LTCG) Reporting

Taxpayers are now permitted to declare long-term capital gains (LTCG) under section 112A (derived from listed equity shares and equity-oriented mutual funds) within ITR-1, provided two conditions are met:

• The total LTCG does not exceed Rs. 1.25 lakh.
• There are no brought-forward losses or losses intended for carry-forward under the capital gains category.

Previously, reporting any capital gains typically required filing ITR-2; this revision enables more taxpayers with minimal LTCG to utilize the more straightforward ITR-1 form.

Additional Disclosure for Tax Regime Selection (Section 115BAC)

The new tax regime is currently the default option for individuals. However, eligible taxpayers retain the flexibility to opt out and choose the old regime annually directly within their ITR.

• If a taxpayer opted out of the new regime for Assessment Year 2024-25, they must explicitly declare and confirm their preference or modify it for AY 2025-26.
• Individuals opting out for the first time in AY 2025-26 are required to furnish the acknowledgment details of Form 10-IEA.
• Form 10-IEA must be submitted before the return filing due date.

Enhanced Deductions and Disclosures

Deductions under Sections 80C through 80U now mandate selection from a drop-down menu on the e-filing portal, requiring precise specification of the applicable clause or sub-section. This enhancement aims to boost accuracy and transparency. Additionally, new fields have been introduced for income from retirement accounts maintained overseas (Section 89A) to facilitate improved relief tracking.

Aadhaar Enrollment ID Removed

The 28-digit Aadhaar Enrolment ID is no longer accepted for filing purposes. The relevant field now exclusively requires a valid 12-digit Aadhaar Number.

Additional Column under Schedule TDS

Schedule - TDS Details now includes an extra column for specifying the precise section under which Tax Deducted at Source (TDS) has been applied.

Major Changes in ITR-4 Form from AY 2024-25

Several key modifications have been integrated into the ITR-4 form, effective from Assessment Year 2024-25:

• The default tax regime transitioned to the new tax regime, a change enacted by the Finance Act 2023 through amendments to Section 115BAC. For individuals, HUFs, AOPs, BOIs, and AJPs, the new regime is now applied by default. Taxpayers preferring the old tax regime must actively opt out. An individual filing ITR-4 who wishes to use the old tax regime must submit Form 10-IEA.
• The ITR-4 form has been updated to incorporate a new column for disclosing amounts eligible for deduction under Section 80CCH. This section, introduced by the Finance Act 2023, permits individuals enrolled in the Agnipath Scheme who subscribe to the Agniveer Corpus Fund on or after November 1, 2022, to claim a tax deduction for the total sum deposited.
• The Finance Act 2023 also increased the turnover threshold for opting into the presumptive taxation scheme under Section 44AD from Rs. 2 crores to Rs. 3 crores. This higher limit applies provided that cash receipts do not exceed 5% of the total turnover or gross receipts for the previous year.
• Furthermore, Section 44ADA was amended to elevate the gross receipts threshold from Rs. 50 lakhs to Rs. 75 lakhs, contingent on cash receipts not exceeding 5% of the total gross receipts for the preceding year.
• To reflect these adjustments, ITR-4 now includes a new column in Schedule BP for reporting "receipts in cash." The definition of cash includes cheques or bank drafts that are not account payee.

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