ITR-4S Sugam Form

A comprehensive guide to understanding the ITR-4S Sugam Form

What is the ITR-4S Form?

The Sugam ITR-4S Form is the Income Tax Return form for those taxpayers who have opted for the presumptive income scheme as per Section 44AD and Section 44AE of the Income Tax Act. However, if the turnover of the business mentioned above exceeds Rs 1crores, the tax payer will have to file ITR-4.

The due date of filing the ITR-4S form for the Financial Year 2015-16 is 31 July, 2016.

Presumptive Income & its Taxation – under section 44AD

When you are running a small business, you may not have enough resources to maintain proper accounting information and calculate your profit or loss. This makes it difficult to keep track of your income from such a business and find out how much tax you need to pay.

With this in mind the Income Tax Department has laid out some simple provisions where your income is assumed based on the gross receipts of your business. This method is called the presumptive method, where tax is paid on an estimated basis.

Features of this Scheme

• Your Net Income is estimated to be 8% of the gross receipts of your business.
• You don’t have to maintain books of accounts of this business.
• You don’t have to pay Advance Tax for such a business.
• You are not allowed to deduct any business expenses against the income.

If you are running more than 1 business, the scheme has to be chosen for each business. For example, if you run 3 businesses where only 1 is assessed under section 44AD. The relief of not maintaining accounting records & no requirement of audit is only applicable to the business to which this scheme applies. For other 2 businesses which are not covered under this section – the accounting records have to be made and audit is also required.

Similarly, in case of Advance Tax, the exemption from payment of advance tax is only granted for the business for which this scheme has been opted for. If the tax payer has income which is other than from such business, where his tax liability exceeds Rs 10,000 in a year, he has to pay advance tax on such other income. Advance tax will only be calculated on the remaining income and not for the business covered under section 44AD.

The scheme cannot be adopted by the taxpayer, if he has claimed deduction under section 10, 10A, 10B, Section 10BA, or Section 80HH to 80RRB in the relevant year.

Eligibility Criteria for this SchemeTo be eligible for this scheme:

• Your gross receipts or turnover of the business for which you want to avail this scheme should be less than Rs 1 crore.
• You must be a Resident in India.
• This scheme is allowed to an individual, a HUF or a partnership firm. It is not available to a Company.

Eligible BusinessesThe taxpayer may be in any business – retail trading or wholesale trading or civil construction or any other business to avail this scheme. But this method of income computation is NOT applicable to:

• Income from commission or brokerage
• Agency business
• Business of plying, hiring or leasing goods carriage (see section 44AE)
• Professionals – who are carrying on profession of legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, an authorized representative, film artist, company secretary and information technology. Authorized representative means – any person, who represents someone, for a fee or remuneration, before any Tribunal or authority under law. Film Artist includes a producer, actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screenplay writer, dialogue writer, dress designer – basically any person who is involved in his professional capacity in the production of a film.

These are the professions listed under section 44AA(1).

Devesh runs a medical shop in his colony. The receipts of his business are Rs 95,00,000 in financial year 2015-16. Can Devesh take benefit of the scheme under section 44AD?

Devesh is a resident and his receipts from this business are less than Rs 1crore. His business is not listed under the non-eligible businesses list and therefore he can avail this scheme under section 44AD.

Deduction for Business ExpensesNo business expenses are allowed to be deducted from the net income. Depreciation is also not deductible. However, in case of a partnership firm, separate deduction for remuneration of partners and interest paid to partners is allowed. This must be within the limit specified under section 40(b).

Even though depreciation is not allowed as a deduction written down value (WDV) of the assets shall be considered as if depreciation has been allowed.

Rohit runs a kiryana shop and his gross receipts are Rs 75,12,260 from this business. He decided to opt for the scheme under section 44AD. He also wants to claim depreciation for 1 large refrigerators and a computer with billing system he purchased for Rs 2,50,500. He also spent Rs 1,50,000 buying new racks for displaying his goods.

Since Rohit has opted for the presumptive scheme under section 44AD, his net income is computed as 8% of Rs 75,12,260 = Rs 6,00,981. Under this scheme no deductions are allowed from income. Rohit will not be allowed to deduct depreciation from this income. He cannot deduct expenses for purchase of the new rack.

Can the taxpayer declare higher or lower income than 8% of gross receipts?The taxpayer can voluntarily declare a higher income and pay tax on it. In case the taxpayer chooses to declare lower income than 8% of gross receipts – he shall have to maintain books of accounts and get them audited.

Computing Turnover or Gross Receipts

Gross receipts or Turnover mean the total collections of the business. The receipts shall be inclusive of VAT & Excise Duty. The receipts shall also include delivery charges as well as receipts from sale of scrap.

Discounts given, advances received and money received on sale of assets should be excluded.

Do you want to know if ITR-4S is applicable to you?

The tax experts can help you prepare & file ITR-4S.

Presumptive Income in case of taxpayers engaged in business of plying, leasing or hiring of trucks (under Section 44AE)

For those who are in the business of plying, leasing or hiring of trucks a scheme similar to presumptive income scheme under section 44D is available.

Features of this scheme

• 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.
• You don’t have to maintain books of accounts of this business.
• You don’t have to pay Advance Tax for such a business.
• You are not allowed to deduct any business expenses against the income.

Here ‘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.

Part of a month shall be rounded off to the next month. For example if a goods carriage is owned for 9 months and 3 days, the net income shall be calculated as if the carriage was owned for 10 months.class=”mt20

The relief of not maintaining accounting records & no requirement of audit is only applicable to the business to which this scheme applies. For any other businesses which are not covered under this section – the accounting records have to be made and audit is also required.

In case the taxpayer chooses to declare lower income than above, he shall have to maintain books of accounts and get them audited.

Eligibility CriteriaTo avail this scheme

• You should be in the business of plying, leasing or hiring trucks.
• You should not own more than 10 goods carriages at any time during the year. Include carriages taken on hire purchase or on installments.
• You may be an individual, HUF, Company or partnership firm – scheme is allowed to all taxpayers.

Deduction for Business ExpensesNo business expenses are allowed to be deducted from the net income. Depreciation is also not deductible. However, in case of a partnership firm, separate deduction for remuneration of partners and interest paid to partners is allowed. This must be within the limit specified under section 40(b).

Even though depreciation is not allowed as a deduction written down value (WDV) of the assets shall be considered as if depreciation has been allowed.

Can the taxpayer declare higher or lower income?The taxpayer can voluntarily declare a higher income and pay tax on it. In case the taxpayer chooses to declare lower income than as mentioned above – he shall have to maintain books of accounts and get them audited. Where proper accounting records have to be cash payments of more than Rs 20,000 (and not made via an account payee cheque or bank draft) are not deductible, however, in case of a transport operator this limit has been increased to Rs 35,000.

What is the structure of the ITR-4S Form?

ITR-4S is divided into:

• Part A: General Information
• Part B: Gross total income from the five heads of income
• Part C: Deduction and total taxable income
• Part D: Tax computation and tax status
• Verification & signatures on the return

Schedule BP – Details of income from Business. The following information is required in this schedule

Computation of presumptive income under 44AD

Computation of presumptive income under 44AE

Financial Particulars of the Business

• Schedule IT: Statement of payment of advance-tax and tax on self-assessment.
• Schedule-TCS: Statement of tax collected at source.
• Schedule TDS1: Statement of tax deducted at source on salary.
• Schedule TDS2: Statement of tax deducted at source on income other than salary.
• Supplementary schedule TDS1
• Supplementary schedule TDS2
• Supplementary schedule IT
• Supplementary schedule TCS

How do I file my ITR-4S Form?

You can submit your ITR-4S Form either online or offline. It is mandatory to file Income Tax Returns electronically (either through Mode 3 or Mode 4) for the following assesses:

• those who earn more than Rs. 5 lakhs per year
• those having any assets outside India (including financial interest in any entity) or signing authority in any account outside India
• those claiming relief under Section 90/90A/91 to whom Schedule FSI and Schedule TR apply

Offline:

• By furnishing a return in a physical paper form
• By furnishing a bar-coded return

The Income Tax Department will issue you an acknowledgment at the time of submission of your physical paper return.

Online/Electronically:

• By furnishing the return electronically under digital signature
• By transmitting the data electronically and then submitting the verification of the return in Return Form ITR-V

If you submit your ITR-4S Form electronically under digital signature, the acknowledgment will be sent to your registered email id. You can also choose to download it manually from the income tax website. You are then required to sign it and send it to the Income Tax Department’s CPC office in Bangalore within 120 days of e-filing.

Remember that ITR-4S is an annexure-less form i.e. you do not have to attach any documents when you send it.

Frequently Asked Questions

What is the difference between ITR-4 and ITR-4S?

ITR-4 is to be filled by individuals/HUFs/small businesses having income from proprietary businesses or profession.

In case the presumptive income method is applicable to you, you must file ITR-4S.

However, businesses or profession which are covered under presumptive income under section 44AD and section 44AE where the Turnover/Gross Receipts exceeds Rs 1 crore must file ITR-4.

Can Freelancers file ITR-4S?

ITR-4S is not applicable to professionals; therefore it cannot be filed by Freelancers. See the list of Eligible Businesses above. Freelancers must file ITR-4. For more details on the ITR-4 Form, do check out our guide here.

Can deductions under Section 80 be claimed from presumptive income while filing ITR-4S?

The taxpayer is allowed to claim deduction available undersection 80 from his total income when computing income under Section 44AD and Section 44AE.