Question 1

What is the presumptive taxation scheme under Section 44AD?

Accepted Answer

Under Section 44AD, small businesses with annual turnover up to ₹3 crore can declare 8% of turnover (or 6% for digital receipts) as net income without maintaining detailed books of accounts. This simplifies compliance significantly. The scheme is available for resident individuals, HUFs, and partnership firms (not LLPs).

Question 2

Who is eligible to file ITR-4?

Accepted Answer

ITR-4 (Sugam) is for resident individuals, HUFs, and firms (other than LLPs) who opt for presumptive taxation under Section 44AD (business turnover up to ₹3 crore), 44ADA (professional receipts up to ₹75 lakh), or 44AE (goods transport operators). You cannot use ITR-4 if you have capital gains, foreign income or assets, or are a director in a company.

Question 3

What happens if I declare less than 6% or 8% under 44AD?

Accepted Answer

If you want to declare income lower than the presumptive rate, you must opt out of the scheme, maintain books of accounts, and get a tax audit done under Section 44AB. Additionally, once you opt out of the presumptive scheme, you cannot re-enter it for the next 5 years.

Question 4

Do I still need to pay advance tax under the presumptive scheme?

Accepted Answer

Yes, but the rules are simplified. Individuals under the presumptive scheme can pay the entire advance tax in a single instalment by March 15 of the financial year, instead of four separate instalments. Failure to pay advance tax attracts interest under Section 234C.

Question 5

Can a freelancer or consultant use ITR-4?

Accepted Answer

Yes, if the freelancer or consultant falls under the specified professions covered by Section 44ADA — including IT professionals, designers, management consultants, and similar knowledge workers — and their gross receipts are up to ₹75 lakh, they can use ITR-4 and declare 50% of receipts as income.

ITR-4 Filing — Presumptive Taxation (Sugam)

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