ITR-4: Easiest Income Tax Return Form for the Freelancers, Agency Owners and Professionals

If you’ve jumped on this article, it means you want to file your income tax return quickly and hassle-free without getting into too many complications.

“Why are you tense, Simran?”

“Raj, I wanted to get a personal loan. But the bank asks me to submit the income tax return documents.”

“So? You must have filed it last year, didn’t you?”

“Oh come on. I would rather give up the thought of taking a personal loan. Income tax return filing is a tough nut to crack.”

“C’mon, nowadays, it has become more like a walk in the park. You don’t even have to keep the accounting records handy.”

Yes, income tax laws in India are becoming easier day-by-day. To promote ease of doing business, the Government is simplifying the process so the businesses and professionals can focus on revenue and growth instead of scratching their heads around compliances.

Are you a freelancer or an agency owner? You can file your income tax return in less than an hour. I can see some eyes rolling.

ITR-4 is the answer to all your tax concerns. It’s a simple tax return form for the business owners and professionals who don’t want to get into the complexities of the income tax law.

I will focus mainly on agency owners, solopreneurs (engaged in professional services) and freelancers for this article. You’ll learn:

• What is ITR-4?
• Who is eligible to file ITR-4?
• How to calculate profits from your income?
• Can you get rid of all the accounting records if you’re eligible for ITR-4?
• Can you mention salary details in ITR-4 along with the freelancing income?
• What’s the due date for filing ITR-4 for FY 2019–20?

What is ITR-4?

ITR-4 (also called SUGAM) is an income tax return form which can be filed by the businesses and professionals under ‘presumptive taxation scheme’.

Only those taxpayers can file ITR-4 whose total gross receipts (total receipts from all clients including the foreign clients) are less than Rs 50 lakhs in a financial year.

How to Calculate Profits from the Professional Income?

Out of the total receipts in a year (amount received from all clients including the foreign clients), you can deduct up to 50% as the business expenses and show the remaining amount as profits from freelancing income. Tax is charged on the profits, not the total receipts.

Remember, you can’t claim any additional expense apart from claiming 50% as the business expenses. If you wish to claim over 50% as the business expenses, then you must file ITR-3 after getting your accounts audited. It’s a cumbersome process since you’ll also have to maintain accounting records.

Who is Eligible to File ITR-4?

Professionals who’re engaged into the following professions can file ITR-4:

• Legal
• Medical
• Engineering
• Architecture
• Accounting
• Technical consultancy
• Interior decoration

This list covers nearly every field in which a freelancer or an agency owner works. For our easy understanding, writers, marketers, graphic designers, website developers, video editors, content marketing agencies, digital marketing agencies, etc. can avail the benefit of ITR-4. However, if in doubt, consult with a tax expert to determine your eligibility.

Can You Get Rid of all the Accounting Records if You’re Eligible for ITR-4?

Yes, if you’re filing ITR-4 return, you’re not required to maintain accounting books. However, ITR-4 requires following details related to cash and bank summaries.

• Opening balance
• Receipts during the year
• Payments/ withdrawals during the year
• Closing balance

A normal excel sheet can be maintained for tracking your cash and bank transactions for tax purposes.

Can You Mention Salary Details in ITR-4 along with your Freelancing Income?

Yes. Apart from reporting profits from business & profession, you can report the following incomes as well in ITR-4:

• Income from Salary (including allowances, perquisites etc.)
• Income from House Property (only 1 house property)
• Income from Other Sources.

What’s the Due Date for Filing ITR-4 for FY 2019–20?

According to the Government’s latest intimation, the due date for filing ITR-4 is 30th November 2020.

Final Thoughts

ITR-4 is easy to fill, simple to understand, and crisp. If you still face any problem in filing the income tax return or managing your taxes, reach out to me via LinkedIn.