Small entrepreneur/business owner? Here’s the best way to file your income tax return


Running a business and maintaining regular books of accounts is a tedious task for small/new entrepreneurs. To relieve such entrepreneurs from the maintenance of regular books of account and to focus on their business, the Income Tax Act provides certain relaxations for maintenance of books of accounts.

  • Section 44AD provides that an eligible taxpayer engaged in any business (except business of plying, hiring, or leasing goods carriages or earning commission/brokerage or carrying agency business) and whose total turnover/gross receipts from such business in the previous year does not exceed Rs 2 crores can declare 8 percent of gross receipts/total turnover (6 percent in respect of turnover or gross receipt received by banking channel) or a sum higher than the sum computed as above as their deemed profits from business.
  • Section 44ADA provides that eligible professionals having total gross receipts not exceeding Rs 50 lakhs can declare 50 percent of gross receipts or a sum higher than the sum computed as above as their deemed profits from the profession.
  • Section 44AE provides that eligible assessee not owning more than 10 goods carriages engaged in the business of plying, hiring, or leasing can declare Rs 7,500 for a month/part of month for which the goods carriage is owned by the assessee or actual income earned from the vehicle, whichever is higher as their deemed profits from business.
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Some of the other features of presumptive taxation scheme are:

  • 100 percent advance tax should be paid in the fourth quarter i.e. other quarterly due dates of advance tax are not applicable in this case.
  • No other deduction is allowed in respect of any expenditure against the deemed profits declared.

Here you have an opportunity to file your income tax return in a much simpler form, which is ITR-4 Sugam instead of ITR-3.

ITR-4 Sugam can be filed by resident individuals, Hindu undivided families, and partnership firms (excluding LLP’s) having income from any of the aforesaid specified business or profession and opted for presumptive income scheme as discussed above. Further, apart from presumptive income, the other income to be reported in ITR-4, if any, may be from salary or income from one house property (excluding cases where a loss is brought forward from previous years) or income from other sources (excluding winning from lottery and income from horse races). Further, in a case where the income of another person like spouse, minor child, etc. is to be clubbed with the income of the assessee, ITR-4 Sugam can be used only if the income being clubbed falls into the above income categories.

Further, the resident individual having foreign assets (including financial interest in any entity) or income outside India or has agricultural income exceeding Rs 5,000 are not eligible to furnish ITR-4 Sugam but will be required to fill ITR-3 or ITR-5 in case the taxpayer is a Firm.

The old ITR-4 sought only four financial particulars of the business – total creditors, total debtors, total stock-in-trade, and cash balance. This time, the new ITR-4 Sugam seeks more financial details of the business, such as the amount of secured/unsecured loans, advances, fixed assets, capital account, etc. Further, new ITR-4 seeks GSTR no. of the assessees and turnover as per GST return filed by them.

ITR-4 Sugam needs to be filed electronically except where the individual reached the age of 80 years at any time during the previous year, or individual/HUF whose total income does not exceed five lakh rupees and no refund is claimed in the return of income.

Pooja Karani is a Second Year Article Trainee and Gopal Bohra is a Partner N.A. Shah Associates LLP.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)


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