When to file ITR 4S – Income Tax Return Form for Small businesses

Tax department has introduced various forms for individuals like ITR-1, ITR-2, ITR-4 and ITR 4S. If you are running a small business it’s likely you have heard of the ITR 4S (sugam) form.

ITR 4S (also called Sugam) is for those businesses who have calculate the business income on the basis of presumption irrespective of actual income.

Section 44AD and 44AE of income tax act 1961 specifies presumptive income scheme for assessee in certain cases.

If tax payer has chosen to file ITR 4S then as per law there is no requirement of maintaining books of accounts, profit and loss account and audit.

As per section 44AD of income tax act 1961, net income of the assessee is estimated to be 8% of the total gross receipt disclosed in the ITR 4S.

Recommended Read: Presumptive taxation under section 44AD

As per section 44AE of income tax act 1961, in case of businesses of plying, leasing or hiring of trucks, net Income from a heavy goods vehicle (including any goods carriage) will be assumed as Rs 7,500 per month for each vehicle beginning assessment year 2015-16.

However, to get eligible for section 44AE, you should not own more than 10 goods carriages at any time during the year including carriages taken on hire purchase or on installments.

For the purpose of section 44AE, ‘Goods carriage’ means any vehicle used only for the carriage of goods. ‘Heavy goods vehicle’ means a goods carriage whose standalone weight (without loading goods) is more than 12,000 kgs.

Recommended Read: Provisions of presumptive taxation under section 44AE

ITR 4S will let you report your income as 8% of the gross receipt (as per section 44AD) or as Rs 7500 per month per vehicle (as per section 44AE).

If you have calculated tax liability on the basis of presumed business income as required under section 44AD or 44AE and filed ITR 4S, you don’t have to pay advance tax.

When filing of ITR 4S is not applicable

This scheme and filing of ITR 4S is applicable when gross receipts or turnover of the business is not exceeding Rs 1 crore and the business is not registered as a company. This means, this scheme is applicable to an individual, partnership firm, HUF.

If the turnover of the business is more than Rs 1 Crore then ITR 4S cannot be used for filing income tax return.

Assessee will also not be eligible to file ITR 4S is income earns from sources outside India. For instance, if you are a web developer and getting income from clients outside India then you cannot file ITR 4S.

Professionals like accountants, lawyers, doctors, engineers, technical consultants, interior decorators, company secretaries, chartered accountants, tutors, film artists and freelancers falling under section 44AA of income tax act 1961 are also not eligible to file their return by using ITR 4S.

Recommended Read: Section 44AA – Compulsory maintenance of books of accounts

As per section 44AD, a person having income from commission or brokerage, like wealth advisor or insurance agents or carrying on agency business are not eligible to calculate their business income on presumption basis. For this reason they will not be eligible to file their return by using ITR 4S form. They instead have to use ITR4 form for filing their income tax return.

ITR 4 is a detailed form, possibly one of the two longest of all tax return forms.

The option of filing ITR 4S is also not available to people who own more than one house property.

Here are certain other cases where you cannot file ITR 4S;

• You have capital gains or losses to be carried forward and/or having income from speculative business
• You hold any assets outside the country or have any financial interest in any foreign entity
• You are signing authority in any account located outside India
• You have claimed relief under section 90 or 91.
• Income includes agricultural income or exempt income of more than Rs 5000.

Where assessee has more than one business

If you as an individual have more than one business and for one of the business you are eligible to calculate business income on presumptive basis then you need to file ITR4, since you can file only one return form. You can include income from your presumptive business in ITR 4 form.

For example, if you run 2 businesses where only 1 is required to be assessed under section 44AD or 44AE then relief of not maintaining books of accounts and no requirement of audit is applicable only to the business to which this scheme applies. For the other business which is not covered under section 44AD, you are required to maintain accounting records and if audit is applicable then required to get it audited. You have to file ITR 4 form by showing both businesses income.

In our above example, exemption from payment of advance tax is granted to the business for which presumptive scheme has been opted. For the other business, if your tax liability exceeds Rs. 10,000 in a year, you are required to pay advance tax on such income. This means, advance tax will only be calculated on the remaining income that is not covered under presumptive scheme.

The due date of filing ITR 4S is 31^st July of the assessment year for which tax return is filed. However, this due date can be extended by CBDT. If it’s extended then the extended date will be considered as the due date in place of 31^st July.

After filing ITR 4S, if it’s digitally signed by using assessee DSC then acknowledgement (ITR-V) generated after filing is not required to be sent to the income tax CPC Bangalore office. If it’s not signed by using DSC then the assessee is required to send the signed copy of ITRV to Income tax CPC Bangalore office within 120 days from the date of filing return of income.