When it comes to choosing the right business, more often than not, you would have made the perfect choice. You have identified your strengths when it comes to a product or service, developed a strong marketing strategy, and finally found success with skyrocketing sales and healthy profits.
However, you also need to ensure that your business runs smoothly, there are certain responsibilities that you must not forget. One of these responsibilities is ensuring that you appoint a qualified chartered accountant to maintain your book of accounts as well as calculate the correct amount of tax payable by you.
The other responsibility is to file your income tax return on time using the right income tax form.
You need to file the Sugam ITR - 4S form if you have chosen the presumptive income scheme as per Section 44AD and 44AE of the Income Tax Act, 1961. If you have a small business, then instead of maintaining books of accounts, you can declare your income on a presumptive basis, rather than on an actual basis. As per presumptive taxation, your income is calculated on a percentage of sales. The due date for filing this form is 31st July of every year. From FY 2016-17 (AY 2017-18), the ITR-4S return form has been discontinued.
You can use the ITR 4S form if you are in retail, wholesale, civil construction, and so on. But, you cannot use this form for:
Commission or brokerage business.
Agency.
Leasing, hiring, plying goods carriage.
Legal, information technology, medical, company secretary, engineering, interior decoration, architectural, film artist, or accountancy profession.
These are different sections under the Income Tax Act which deal with presumptive taxation. We will find out what each of these sections deal with.
To simplify the taxation requirements of small businesses, the Income Tax department has allowed them to declare their income as a percentage of their sales and exempted them from maintaining books of accounts.
This is applicable to tax payers dealing in the hiring, leasing, and plying of trucks.
It is important to note that:
Eligibility:
This section applies to professionals having annual gross receipts less than Rs. 50 lacs.
The presumptive tax rate is fixed at 50% of the annual gross receipts.
The following professionals are eligible:
There are certain eligibility criteria you need to fulfil to qualify for this scheme. They are:
Gross receipts
Your gross receipts need to be under Rs. 2 crore annually.
Residential status
This scheme can only be availed by citizens of India.
Applicability
This scheme is only open to individuals, HUF (Hindu Undivided Family), or partnership firms. Companies are not eligible.
It is important for you to understand the features of this scheme before filing your return. These are the important features of the Sugam ITR-4S form:
Your Net Income (Gross income less cost of goods sold, expenses, and taxes) is presumed to be 8% of the gross receipts that you have earned during a financial year. If you receive the gross receipts digitally, then the rate of gross receipts is 6% as opposed to 8% of gross receipts in cash.
You are not required to maintain your books of accounts.
In you are an owner of such small businesses, the full advance tax needs to be paid by the 15th of March every year. Payment of advance tax in quarterly instalments in June, September, and December is not required.
You will, however, not be allowed to deduct business expenses against the income declared by you. If you have multiple businesses, then presumptive taxation will be applied only to the business which is assessed under Section 44AD. The same rule applies with payment of Advance Tax that is the business being assessed under Section 44AD. Advance tax has to be paid for your other businesses if the tax liability exceeds Rs. 10,000/- per year.
You cannot apply for this scheme if you have claimed deduction under Section 10, 10A, 10BA, 80HH to 80RRB in that financial year.
Let us understand the format of the ITR-4S that you need to fill up.
Verification and signatures required
Business income details to be provided. You need to provide computation of presumptive income under section 44AD and 44AE.
You can file your Sugam ITR - 4S online or offline.
You can either file it through a paper form or provide a bar-coded return.
You need to file your returns electronically, if you earn more than Rs. 5 lacs annually, have assets outside India, or have claimed relief under Section 90/90A/91 relating to those who come under FSI or Schedule TR.
Returns can be filed electronically using a digital signature or entering the data electronically and then submitting the verification of the return through ITR-V.
ITR 4-S can be filed only by individuals, HUFs, or partnerships with income from the undermentioned sources:
Business income according to presumptive taxation scheme under section 44AD and/or 44AF of the Income Tax Act.
Salary Income.
Income from House Property (except when accumulated losses from previous years are brought forward).
Income from other sources such as savings account interest, fixed deposit interest, but excluding income from lotteries and race horses.
Individuals, HUF, or partnership firms having income from the following sources cannot file ITR 4S:
Where there are more than one house property where you are earning an income.
Loss from house property in the previous year brought forward.
Capital gains earned from sale of shares, mutual funds, property, and so on.
Income derived from business of a speculative nature.
Income from agency, brokerage, commission and profession
Agricultural income in excess of Rs. 5000.
Income from gambling activities like lottery, horse racing, card games, and so on.
Income earned from a foreign source.
Where you intend to claim double taxation benefit under Section 90/90A/91 of the Income Tax Act.
If you are a resident Indian and have either bank accounts or foreign assets like property, shares, and so on.
This form can only be filled up by individuals, small businesses, and Hindu undivided families with presumptive income under section 44AD and 44AE as well income from salary or pension, income from a single house property, and income from other sources (other than lotteries and horse racing). This form can be submitted manually or electronically. No documents need to be affixed with this form.
Yes, a copy of the income tax return needs to be kept as the income tax department can initiate legal proceedings against you 4 to 6 years prior to the current financial year.
Simplify Your Taxes with Sugam ITR - 4S
If you are an individual, HUF, or partnership firm with a small business having a turnover of not more than Rs. 2 crores annually, then you are eligible for the presumptive taxation scheme under Section 44AD/44AE/44ADA (depending on what category you belong to). You also need to ensure that the other criteria like no income from speculative business, lotteries, and so on. Then, all you need to do is pay tax online or offline at 8% of your net income and you are done! Gain from Sugam ITR - 4S and do business with complete peace of mind!
