If you are a freelancer or if you run a small business, you are required to file the Form 4 at the time of income tax filing. The Form 4 is a simplified returns form for individuals as well as businesses that do not have the means of calculating their taxable income.
The form, which is also referred to as SUGAM, is meant for any business with presumptive income according to the Sections 44AD, 44ADA and 44AE of the Income Tax Act.
In simple terms it means that if you run a small business and do not have the resources to calculate your profit and loss, the IT department lets you file a return based on your presumed income. The income is presumed on the basis of the receipts of payment from the agencies you worked form. This form is not mandatory and if you have kept records, maintained balance sheets and got your profit and loss audited, you may fill the regular Form 3 and 5.
Form 4 is applicable only if your gross income through your business is less than Rs 2 crore. If you are a freelancer professional, you have to file Form 4 if your gross income is less than Rs 50 lakh. Your net income is estimated to be 8 percent of your gross income. If the payments were made to you digitally, the net income becomes 6 percent of your gross income.
Who can file ITR Form 4 (Eligibility)
Anybody, who has opted for the presumptive income scheme under the Sections 44AD, 44ADA and 44AE of the IT Act, is eligible for filing the ITR Form 4.
This includes individuals or a Hindu Unified Families, who are resident Indians. In case of individuals the total income for the assessment year 2019-20 should not exceed Rs 50 lakh. For small businesses the gross income should not exceed Rs 2 crore.
Any individual/ business earning income from any of the following sources is eligible to file Form 4:
- Income from business where such income is computed on presumptive basis under Section 44AD (i.e. Gross Turnover upto Rs 2 crore) or Section 44AE (income from goods carriage upto ten vehicles); or
- Income from Profession where such income is computed on presumptive basis under Section 44ADA (i.e. Gross receipt upto Rs 50 lakh); or
- Income from Salary/ Pension; or
- Income from One House Property; or
Income from Other Sources.
This Form is NOT applicable to the following:
- Director in a company;
- Individuals holding any unlisted equity shares at any time during the previous year;
- Individuals with any asset (including financial interest in any entity) located outside India;
- Anybody with a signing authority in any account located outside India;
- Anybody enjoying income from any source outside India.
- Individuals with profits and gains in the previous year from business and professions which is not listed in the sections 44AD, 44ADA or 44AE. This includes income from speculative business, agency business, commission or brokerage income;
- Persons with capital gains or income from more than one house property or income from winnings from lottery. If you have income from owning and maintaining race horses, you will not be eligible for Form 4;
- If your income is taxable at special rates under section 115BBDA or section 115BBE, you cannot file Form 4.
How to download Form ITR-4
The Form 4 SUGAM has to be filed online using the digital signature certificate. This has been mandated by the Income Tax department. Only those people who are over 80 years old or who have a gross income not Rs 5 lakh are allowed to file Form 4 SUGAM offline or on paper. The offline filing is allowed only when the returns claimed are zero.
You can download the Form 4 SUGAM from the official website of the Income Tax department. There are no charges on the download of Form 4. You can fill the form online and submit the same using a digital signature certificate.
Once you have done that, you need to complete the acknowledgement form in ITR 5. Print out two copies of the acknowledgement form. Sign one of them and send it to the Income Tax Office in Bengaluru. The address is Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka).
Keep the second copy for your own record.
Dates for filing ITR Form 4
Businesses that have opted for the presumptive income scheme under Sections 44AD, 44ADA and 44AE of the Income Tax Act have to file their income tax return by September 30. They can choose to use the Form 4 if they do not have the resources to maintain record of profit and loss or to get their accounts audited. If the business has maintained accounts and audited profit and loss statement, they can use Form 3 and 5 to file their income tax returns.
Freelancers and professionals have recently been included in the presumptive income scheme. To make use of the scheme, the taxpayer must have receipts for gross income from their services. The last date for individuals to file ITR For 4 SUGAM is July 31.
Structure of ITR Form 4
The ITR Form 4 has is structured into four parts and six schedules. Here we tell what the parts and schedules comprise:
Part A: General Information
This section requires you to fill out your personal details such as name, address, PAN details, Aadhaar number and Email address. You also need to mention your nature of employment. The section also asks you if you are filing the return on your own or through a representative such as a chartered accountant.
Part B: Gross Total Income
This section deals with your gross income. You need to enter the aggregate of income chargeable under ‘Business or Profession’. Enter your salary, value of perquisites and profits in lieu of salary as per part B of your Form 16. Enter the allowances that are exempt and the standard deduction as per Form B. Fill out other necessary information as applicable and proceed.
Part C: Deductions and Total Taxable Income
Here, you mention deductions you are eligible for. It could be in the form of insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. Contributions to pension funds, health insurance premia, interest on loan for higher education or buying property, too, are exempt from tax.
Part D: Tax Computation and Tax Status
You need to calculate the tax payable on your total income based on the given formula. You also have to calculate the amount payable. Also provide the details of all the savings/current accounts held by you at any time in India during the previous year. Indicate the account in which you would want the refund to be credited. It doesn’t matter whether you have any refund or not.
Schedule BP: You enter the details of your business.
Schedule AL: Mention your assets and liabilities
Schedule IT: Mention details of tax paid in advance for the year.
Schedule TCS: This schedule asks for details of all tax collected at source.
Schedule TDS1: Mention the tax deducted at source from your salary in this schedule.
Schedule TDS2: Mention the tax deducted at source from income from any source other than salary.
How to fill ITR- 4
Before filling out the ITR Form-4 SUGAM, it is important that you understand the. Structure of the form and the information required.
As mentioned above, the form is divided into four parts and six schedules. Not everything has to be input by you as some details are auto-populated based on the information that you give.
The first part is about general information. It asks for personal information about the individual. This includes PAN, name, address, contact details and other relevant information.
Next is the part where you fill out information about your Gross Total Income. Fill in your income particulars from various sources such as business/ profession, salary or pension, house and other sources.
In the next step, you need to fill our details of the deductions you are eligible for. Your total deduction cannot be more than your gross total income. Select the nature of your business or businesses if you have multiple. In the next schedule specify the details of your assets and liabilities. Fill out all the other schedules, give details of tax paid in advance, tax deducted at source and tax collected at source.
Thereafter, you have to furnish details of your bank accounts that were active during the past year. It is not mandatory to mention an account that has been dormant for the past three years. The rest, you have to mention. Insert the valid account numbers and IFSC codes. The bank must have Core Banking Solution (CBS) system activated. Of the accounts, mention the one in which you wish to get your tax refund transferred. It doesn’t matter if you have claimed any returns. You have to select a bank account anyway.
The last part of the ITR is verification. Complete the verification process by filling your name, father’s name, place, date and your PAN details. You can verify your ITR using either digital signature certificate or EVC code. Verification can also be done by filling out ITR Form-V, printing it out and sending it to the Income Tax department. If you fail to verify your return, the department will not consider your return valid.
How to file ITR-4 Offline
The income Tax department does not allow filing ITR 4 SUGAM on paper for either individuals or businesses. The form has to be filled online and submitted online.
The only case in which the department allows on paper filing is if the individual is 80 years old or older. Offline filing is also allowed for individuals with income less than Rs 5 lakh who do not have a any refund to be claimed.
If you fall in these categories, you can file the return by filling out the form on paper. You also need to furnish a bar-coded return and send it to the Bengaluru office of the IT department. Once the department has received your return, it will issue an acknowledgement against your name.
How to file ITR-4 Online
The first step for filing ITR 4 online is to download the form from the official website of the Income Tax department. The Form is freely available for download.
The advantage of filing the return online is that some parts of the Form 4 SUGAM are auto-populated based on the details you input. The form has to be filled duly and submitted online. There are three ways of verifying your return.
Once you have filled the form, you can digitally sign the verification part by issuing a digital signature certificate—the digital equivalent of your signature. You can get a digital signature from a certifying authority or from a CA based on Aadhar KYC authentication.
You can also verify your return by filing out the Form ITR-V. Thereafter you can download the Form ITR-V, sign it and send it to the IT department’s Bengaluru address within 120 days of filing. No attachments are required while sending the paper copy of your return to the IT department.
Alternatively, you can authenticate the Form ITR-V using electronic verification code (EVC). This code is a 10-digit verification code sent to your registered mobile number. You need not print or send a physical copy of the return in this case.
Is it mandatory to fill ITR Form 4 SUGAM?
No. The ITR Form 4 SUGAM is a choice available to the taxpayer who chooses to avail the presumptive income scheme. For example: if you run a small business and do not have the resources for bookkeeping and generating profit and loss statement, you can file your tax return based on a presumptive income. The gross income of your business should not exceed Rs2 crore.
Professionals, too, can file Form 4 if they do not have records of salary slips etc. Their gross income should not exceed Rs 50 lakh.
However, if in either or both of the above cases, there are records of bookkeeping, profit and loss statements, salary statements, the taxpayer can fill the regular ITR 3 and 5 forms
Can I file this form offline?
No. The Income Tax department has mandated that the Form 4 SUGAM be filled online. The only exemption to this is for senior citizens and very small businesses. Only those who are 80 years old or older and businesses which have gross income less than Rs 5 lakh and do not have to claim refund can use the offline method of filing the return.
I am a freelancer. Should I fill ITR Form 4?
Freelancers have two options. They can either file ITR 3 or ITR 4. The ITR 3 Form is for income from business or profession. The ITR 4 Form is for presumptive income from business or profession. The difference between the two is that in case of the latter, the income is presumed. In the Form 4 the net taxable income is considered as 50 percent of the gross income. It is a choice for the freelancer between Form 3 and 4.
I own a cybercafé but I don’t have accounts statement. What should I do?
If you do not have proper account statements or an audited profit and loss statement, you can file your return based on a presumptive income. You can file the ITR Form 4 SUGAM. Your income in a year should not be more than Rs 2 crore. In this case your net income will be considered as 8 percent of your gross income. You can enter your gross income and your taxable income will be calculated automatically. You can claim exemptions against this taxable income.