For small businesses and professionals in India, managing detailed books of accounts and audits can often become a burden. To reduce compliance costs and encourage ease of doing business, the Income Tax Act offers the Presumptive Taxation Scheme (PTS) under Sections 44AD, 44ADA, and 44AE.
Eligible taxpayers can file their income tax returns using ITR-4 (Sugam Form), declaring income on a presumptive basis instead of maintaining full books of accounts.
For the Financial Year 2024–25 (Assessment Year 2025–26), the due date for filing ITR-4 is 31st July 2025 (unless extended by the government).
Who Can File ITR-4?
The ITR-4 Form (Sugam) is applicable for:
- Individuals, Hindu Undivided Families (HUFs), and Partnership Firms (other than LLPs) having:
- Business income under Section 44AD or 44AE, or
- Professional income under Section 44ADA.
- Turnover/gross receipts should not exceed ₹2 crore (44AD) or ₹50 lakh (44ADA).
- Drivers, contractors, and transporters owning up to 10 goods vehicles (44AE).
👉 Not applicable to companies, LLPs, and those with foreign assets or directorship in companies.
Presumptive Taxation Scheme Overview
1. Section 44AD – For Small Businesses
- Eligibility: Resident Individual, HUF, or Partnership firm (not LLP).
- Turnover Limit: Up to ₹2 crore in a financial year.
- Presumptive Income Rate:
- 8% of turnover (if received in cash).
- 6% of turnover (if received digitally/bank transfer).
- Books & Audit: Not required.
2. Section 44ADA – For Professionals
- Eligibility: Professionals like doctors, lawyers, architects, engineers, accountants, IT consultants, etc.
- Turnover Limit: Up to ₹50 lakh.
- Presumptive Income Rate:
- 50% of gross receipts deemed as taxable income.
- Books & Audit: Not required.
3. Section 44AE – For Transporters
- Eligibility: Individuals/firms owning ≤10 goods vehicles.
- Presumptive Income:
- ₹1,000 per ton of gross vehicle weight per month (for heavy vehicles).
- ₹7,500 per month per vehicle (for other vehicles).
Due Date for Filing ITR-4 (FY 2024–25)
- 31st July 2025 – Due date for individuals, HUFs, and firms (non-audit cases).
- 30th September 2025 – If audit is applicable (rare under presumptive scheme).
👉 Filing on time ensures benefits like loss carry-forward (if applicable) and avoiding penalties.
Tax Slabs for Small Businesses & Professionals under Presumptive Scheme
Income declared under presumptive taxation is taxed as per individual tax slabs:
New Regime (Default from FY 2024–25 onwards):
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | Nil |
| 3,00,001 – 7,00,000 | 5% (Rebate u/s 87A up to ₹7 lakh) |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
- Surcharge: 10% (income > ₹50 lakh), 15% (income > ₹1 crore).
- Cess: 4% on tax + surcharge.
👉 Example: A shopkeeper declaring turnover of ₹40 lakh will be taxed on presumptive income = 8% of 40 lakh = ₹3.2 lakh. If opted for new regime, total tax = Nil (since below ₹7 lakh threshold with rebate).
Documents Required for Filing ITR-4
Although detailed books are not mandatory, some documents are still needed:
- PAN & Aadhaar of taxpayer.
- Bank Account details (with IFSC, account number, and balance).
- Form 26AS, AIS, TIS (for TDS/TCS and reported transactions).
- Business turnover/receipts data (from bank statements, invoices, or GST returns).
- Investment proofs (if opting for old regime deductions).
- Details of loans, advances, and interest payments.
Benefits of Presumptive Taxation Scheme
- Simplified Compliance – No need to maintain books of accounts.
- No Audit Requirement – Saves audit cost for small taxpayers.
- Time-Saving – Easy computation with fixed % income.
- Cash Flow Friendly – Encourages digital transactions (lower 6% deemed rate).
- Reduced Professional Fees – Filing ITR-4 is straightforward compared to audited returns.
Limitations of ITR-4 & Presumptive Taxation
- Not available for LLPs, Companies, or Non-residents.
- Not suitable for businesses with high expenses (as only fixed % is allowed).
- Loss carry-forward not available (except depreciation).
- Compulsory continuation – If presumptive scheme opted, must continue for 5 years (44AD), otherwise barred for next 5 years.
Step-by-Step Process to File ITR-4
- Login to the Income Tax Portal with PAN/Aadhaar.
- Select ITR-4 (Sugam) form for AY 2025–26.
- Fill personal details – Name, PAN, Aadhaar, address, bank account.
- Enter income details – Presumptive income under 44AD/44ADA/44AE.
- Upload tax payment details (advance tax/TDS credit).
- Select regime – Old (with deductions) or New (simplified slabs).
- Verify return – Using Aadhaar OTP, DSC, or net banking.
- Download ITR-V acknowledgment for records.
Penalties for Late Filing of ITR-4
- Late Fee u/s 234F:
- ₹1,000 if income ≤ ₹5 lakh.
- ₹5,000 if income > ₹5 lakh.
- Interest (u/s 234A, 234B, 234C): 1% per month on pending tax.
- Loss of Certain Benefits:
- Deduction benefits & carry-forward of losses not allowed if ITR filed late.
Common Mistakes to Avoid
- Declaring turnover incorrectly (cross-check with GST).
- Filing under wrong form (ITR-3 vs ITR-4).
- Opting out of 44AD within 5 years (leads to restriction).
- Not reconciling Form 26AS with declared income.
- Mixing business and personal transactions in bank accounts.
Conclusion
For small businesses and professionals, the ITR-4 under presumptive taxation (Sections 44AD, 44ADA, 44AE) offers a simple and cost-effective way to file taxes without the burden of maintaining books or undergoing audits.
The due date for FY 2024–25 (AY 2025–26) is 31st July 2025. With tax rates based on slabs and presumptive income fixed as a percentage of turnover, compliance becomes easier.
Timely filing ensures peace of mind, avoidance of penalties, and smooth financial record-keeping. Small businesses should leverage this scheme to save compliance costs and focus on growth while staying fully tax-compliant.