Form ITR-4 and ITR-4S

What is ITR-4 Form?

The ITR-4 Form is applicable for individuals or HUFs who have income from proprietary business or are carrying on a profession.

If the requirements of audit are applicable, the due date of filing of return is 30th September. Otherwise, usually the due date of filing of return for non-audit cases is 31st July.

When you have to report income of a business or a profession, ITR-4 is your tax return form. Almost everyone who has a business, however big or small, can file this form. There is no minimum income you should earn to file this return. A shopkeeper, a doctor, a tutor, a retailer, a wholesaler, an insurance agent, interior decorator or fashion designer, everyone can file their tax return in ITR-4.

ITR-4 is a detailed form, possibly one of the two longest of all tax return forms (see summary at the end). If you run a business it’s likely you have heard of the ITR-4S, a much shorter form which is also applicable to businesses. But not all businesses can file ITR-4S.

What is New ITR- 4S?

ITR-4S is a special case ITR, applicable for businesses where income is calculated on ‘presumptive method’. In simple words the presumptive method lets you report your income as 8 per cent of your gross receipts (as per section 44AD of the income tax act) or as Rs 7,500 per month for each vehicle if you are in the business of plying, leasing or hiring trucks (as per section 44AE). You don’t have to maintain accounting records of your business and advance tax rules don’t apply to you. To top it all, ITR-4S is barely a four page document, which you can fill in a short time.

New ITR 4S – Even Firms Can Also File

The new ITR-4S gives relaxation to Firms w.r.t.  Presumptive Income . It also provides various changes such as – disclosure of assets and liabilities by ultra-rich taxpayers and extra deduction of investment in NPS. This change in the ITR shall require the taxpayers to maintain their Books of Accounts too, so as to declare the correct value of their assets and liabilities.

The Form has already been released by the Department, so the taxpayers should get prepared with their documents and start filing their returns within the stipulated time (31st July, 2016). As the forms are released with the start of the Assessment Year 2016-17, this time the extension of the above due date is not likely to be made by the department, so it’s time to get the returns filed at the earliest. The New ITR 4S – Even Firms Can Also File with the following characteristics:

Conditions to file ITR-4S

  • Your gross receipts or turnover must be less than Rs 1 crore.
  • You must be resident of India.
  • You may be an individual, a HUF or a partnership firm but not a company.

Applicability of ITR 4S

ITR 4S can be used by the Individuals/ HUF/ Partnership Firm having the following incomes:

  • Business income where such income is computed in accordance with special provisions referred to in section 44ADand 44AE of the Act for computation of business income; or
  • Income from Salary/Pension; or
  • Income from one house property (excluding cases where loss is brought forward from previous years); or
  • Income from other sources (excluding winnings from lottery and income from race horses).

NOTE:

  • The income computed shall be presumed to have been computed after giving full effect to every loss, allowance, depreciation or deduction under the Income-tax Act.
  • 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, this Return Form can be used only if the income being clubbed falls into the above income categories.

 Non- Applicability of ITR-4S

The Form 4S cannot be used by the taxpayers having the following income:

  • Income from more than one House Property
  • Income from winnings from lottery or income from race horses.
  • Income includes any income chargeable to tax under the head “Capital Gains”.
  • Agricultural income in excess of Rs. 5,000.
  • Income from Speculative Business and other special incomes.
  • Income from a profession as referred to in sub-section (1) of section 44AA or income from an agency business or income in the nature of commission for brokerage.
  • Person claiming Relief of foeign tax paid under Section 90 or 90A or 91.
  • Individual who is a Resident and has –

(i) assets (including financial interest in any entity) outside India

OR

(ii)signing authority in any account located outside India.

  • Any resident having income from any source outside India.

 

When ITR-4S shall not apply at the option of the Assessee

ITR 4S, Business Form, shall not apply at the option of the assessee, if-

  • the assessee keeps and maintains all the books of account and other documents referred to in section 44AA in respect of the business.
  • the assessee gets his accounts audited and obtains a report of such audit as required under section 44AB in respect of the business. In the above scenarios, Regular ITR-4 should be filed and not ITR 4S.

 

Key Changes in the Form ITR 4S

Declaration of value of assets and liabilities by Individuals earning above Rs.50 lakhs:-

 The new ITR form, requires individuals to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. A new reporting schedule i.e., ‘Schedule AL – Asset and Liability at the end of the year’ has been introduced in the ITR. Assets include immovable assets and movable assets.

Immovable assets: taxpayers have to disclose the cost of land and building.

Movable assets: taxpayers have to disclose the cost of Jewellery, bullion, vehicles, Yachts, boats, aircraft and cash in hand.

However, it has not yet come with the required instructions for determining the cost of the immovable and movable assets. Further, the taxpayers are also required to disclose all liabilities in relation to such assets.

 

·         Even Firms can file ITR 4-S for Presumptive Income:-

Under the existing provisions of Rule 12, earlier the firms were required to file ITR 5 even for presumptive income. The new ITR 4S now with the amended Rule 12  allows the firms to file the same for presumptive income. Accordingly, a separate row has been provided for in the Form to claim deduction of interest and salary paid by the firms to the partners.

·         Additional deduction for contribution to NPS under Section 80CCD :-

Finance Act, 2015 introduced a new Sub – Section (1B) in Section 80CCD to provide for an additional deduction of up to Rs. 50,000 for investment in National Pension Scheme. Accordingly, a new row is now introduced in the ITR Form to claim benefits of such additional deduction.

 

The above changes in the ITR form bring in the new reliefs and challenges for the taxpayers. So, start filing your returns and get your accounts prepared at earliest without any delay.

Some Important points should be considered while filing ITR:-

  • The ITR form needs both your physical as well as email address. Ensure that a valid and functional email ID is provided in the form
  • If you are staying in a rental accommodation or a hostel, avoid mentioning that address on the form
  • If you miss filling in one number or character of your permanent account number (PAN), the form cannot be processed.
  • Interest from bank deposits or NSC certificates should be disclosed
  • Deductions for investments made under 80C, 80CCC & 80CCD is restricted to Rs 1.50 lakh wef A.Y. 2016-17.
  • Income of spouse or minor child may have to be clubbed with the income of taxpayer.
  • Be cautious while calculating surcharge and education cess.
  • Safely file all relevant documents for future need
  • Double check all key information like PAN No., bank account details, communication address etc.
  • Always fill correct form
  • Give correct personal details
  • Include all income

Interest and Penalties for late filing of Income tax Return

Income tax return is required to be furnished before 31st July/ 30th Sept Assessment Year. However, if the return is not filed before the due date, interest and penalty would be levied for the late filing of Income tax return.

However, it should be noted that there are 2 things which a taxpayer is required to comply with every year:-

  1. Payment of Income Tax
  2. Filing of Income tax return

Delay in any of the two compliances results in levy of interest and penalty for the delay in compliance.

Interest on Late Payment of Income Tax

Income Tax is required to be deposited with the Govt. in Instalments during the same year in which the income is earned. The income tax would be levied as per the income tax slab rates on the estimated income of the taxpayer and tax would be required to be paid on such estimated income.

The balance tax on the difference between estimated income and the actual income would be required to be paid at the end of the year. This payment of income tax in instalments during the same year in which the income is earned is called as Advance Tax. In case this Advance tax is not paid as per the Schedule prescribed by the Govt, interest would be levied @ 1% per month.

It should be noted that income tax return cannot be filed till the time full income tax has been paid by the taxpayer. Income tax return can only be filed once full income tax has been paid by the taxpayer.

Penalty for Late Filing of Income Tax Return

If the income tax return is not filed before the due date of filing of income tax return, a belated return under section 139(4) can be filed at any time before the expiry of 1 year from the end of the relevant assessment year.

However, the income tax officer may levy a penalty of Rs. 5000 under Section 271F for late filing of income tax return. This penalty is not levied in all cases and is at the sole discretion of the assessing officer.

At the time of late filing of income tax return – you won’t be required to pay this Rs 5,000 as penalty for late filing of income tax return. However, in case you receive a notice from the income tax officer for late filing of income tax return. However, in case you receive a notice from the income tax officer for late filing of income tax return- in such a case you would be required to pay Rs 5,000 for late filing of Income tax return.

In extreme cases, where the taxpayer wilfully fails to furnish the return in due time, may also levy penalty under section 276CC i.e.

  1. In a case where the tax is less than Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 3 months to 2 years
  2. In a case where the tax exceeds Rs. 25 Lakhs – the income tax officer may penalise with imprisonment for a term of 6 months to 7 years.

However, these penalties are levied in a very rare case. In most of the cases, the taxpayer is only required to pay interest @ 1% for late deposit of income tax.

 

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