The ITR forms are designed to provide the different financial scenarios of a taxpayer. Among these commonly used forms are ITR-1 (SAHAJ) and ITR-4 (SUGAM), which are specifically intended for individuals and Hindu Undivided Families (HUFS). While both cater to individuals with specific types of income, their eligibility criteria and filing purposes differ significantly.
Let’s detail the ITR-1 vs ITR-4 difference, examining the purpose, eligibility, structure, and fundamental distinctions.
ITR-1 (SAHAJ)
ITR-1 is a simple return form for employees and pensioners with relatively straightforward income sources and no complicated features such as business income.
Eligibility
You can file ITR-1 if:
Income type:
Salaried income
Pension income
Income from one house property (excluding losses brought forward)
Income from other sources (e.g., interest, dividends, etc.)
Income limit: Your total income does not exceed Rs.50 lakh during the financial year.
Residential status: Only for individuals who are residents (not applicable for non-residents or residents but not ordinarily residents).
Ineligibility
You cannot file ITR-1 if:
You have income from business or profession.
You have more than one house property.
You are a director in a company or have unlisted equity shares.
Your agricultural income exceeds Rs.5,000.
You have foreign income or assets.
Key features
Best suited for salaried individuals with a simple income structure.
Easy to file online with minimal documentation.
No need for detailed disclosure of expenses or business-related information.
ITR-4 (Sugam)
ITR-4 is for an individual, HUF, or a firm other than LLP availing the presumptive taxation under sections 44AD or 44ADA or section 44AE of the Income Tax Act.
Eligibility
You can file ITR-4 if:
Income type:
Business income under the presumptive taxation scheme (Section 44AD/44AE).
Professional income under Section 44ADA.
Income from one house property.
Income from other sources (interest, dividends, etc.).
Income limit: Your total income does not exceed Rs.50 lakh during the financial year.
Taxation scheme: You declare income presumptively (i.e., estimated as a percentage of gross receipts).
Ineligibility
You cannot file ITR-4 if:
Your total income exceeds Rs.50 lakh.
You have more than one house property.
You are a director in a company.
You hold foreign assets or earn foreign income.
You have an agricultural income exceeding Rs.5,000.
You are not availing the presumptive taxation scheme.
Key features
Simplifies tax preparation for small businesses and professionals since it does not entail bookkeeping.
Requires disclosure of gross receipts and presumptive income.
Easy compliance under presumptive taxation without keeping detailed accounts of finances.
Key Difference Between ITR-1 and ITR-4
Criteria
ITR-1 (SAHAJ)
ITR-4 (SUGAM)
Applicability
For salaried individuals and pensioners.
For individuals, HUFS, and firms with presumptive income.
Income sources
Salary, pension, one house property, and other sources.
Business income (presumptive basis), professional income, other sources.
Income limit
Rs.50 lakh.
Rs.50 lakh.
Taxation scheme
Regular taxation.
Presumptive taxation under Sections 44AD, 44ADA, 44AE.
Number of house properties
One house property.
One house property.
Business/Professional income
Not applicable.
Applicable under presumptive scheme.
Foreign assets or income
Not applicable.
Not applicable.
Filing entities
Only individuals.
Individuals, HUFS, and firms (other than LLPS).
Agricultural income
Allowed up to Rs.5,000.
Allowed up to Rs.5,000.
Disclosure of receipts
Not required.
Required for business or professional income.
Accounting records
No detailed disclosures required.
Basic information about gross receipts and presumptive income.
Complexity
Simpler form, suitable for individuals with straightforward incomes.
Slightly detailed but still simplified for presumptive taxpayers.
Practical Cases
Here are some real-world scenarios that highlight ITR-4 vs ITR-1 and their respective applicability:
Case 1: Employee salaried
A person earning Rs.12 lakh as a salary and Rs. 40,000 in interest will file an ITR-1.
Case 2: Freelance graphic designer
A person earning Rs.15 lakh as a freelance graphic designer under the presumptive taxation scheme declaring 50% of the income as profits will file ITR-4.
Case 3: Shop owner
A small shop owner earning Rs.20 lakh per annum, declaring 8% of gross receipts as income under Section 44AD, would file ITR-4.
Case 4: Company director
A company director earning Rs.10 lakh as annual income cannot file ITR-1 or ITR-4; they must opt for another form (e.g., ITR-2 or ITR-3).
Structure And Filing Process
ITR-1 Form Components
Part A – General information: Includes personal details and filing status.
Part B – Gross total income: Details of income from salary, house property, and other sources.
Part C – Tax details: Information about TDS, advance tax, and self-assessment tax.
Part D – Verification: Declaration by the taxpayer.
ITR-4 Form Components
Part A – General information: Personal details, nature of business, and presumptive taxation details.
Part B – Gross total income: Details of income from business, profession, house property, and other sources.
Part C – Tax details: Information about taxes paid and TDS.
Part D – Financial particulars: Information about the balance sheet, profit, and loss account.
Part E – Verification: Declaration by the taxpayer.
Choosing Between ITR-1 vs ITR-4
1. Assess income source:
If salaried or pensioned: ITR-1.
If business/professional income is under presumptive taxation: ITR-4.
2. Check residential status:
ITR-1 is only for residents.
ITR-4 applies to residents and HUFS with presumptive income.
3. Income level:
Both forms are capped at Rs.50 lakh.
Exceeding this requires ITR-2, ITR-3, or ITR-6.
4. Asset disclosure:
Foreign assets or income necessitate different forms (ITR-2 or ITR-3).
Conclusion
The difference between ITR-1 and ITR-4 lies in their simplicity and applicability. ITR-1 is a straightforward form for salaried individuals, while ITR-4 facilitates compliance for small businesses and professionals under presumptive taxation. Understanding your income sources and taxation scheme allows you to determine the appropriate form, ensuring seamless filing and compliance with the Income Tax Department’s requirements.
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The income limit for filing ITR-4 is Rs.50 lakh annually. This includes income from business or profession under the presumptive taxation scheme and other eligible sources.
Is ITR-4 discontinued?
No, ITR-4 is not discontinued. It applies to individuals, HUFS, and firms opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE, provided the income is within Rs.50 lakh.
16 December 2024
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