ITR with Income Under Presumptive Taxation Scheme (ITR-4)
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The Presumptive Taxation System (PTS) offers a simplified approach to income tax filing, allowing small businesses and professionals to save time and effort. By adopting this scheme, individuals can estimate their income based on a predetermined percentage of their turnover or receipts, eliminating the need for maintaining detailed books of account. This article explores the concept of presumptive taxation, its benefits, eligibility criteria, and the process of registering for income tax returns under this scheme.
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What is Presumptive Tax Scheme?
Presumptive Taxation System operates on the premise that income can be measured on an expected basis rather than the actual income earned. Instead of maintaining daily books of account, individuals can choose to claim revenue at a specified rate, simplifying the tax filing process. The Income-Tax Act, 1961, specifies various presumptive taxation schemes, including Section 44AD, Section 44ADA, Section 44AE, Section 44BB, and Section 44BBB, catering to different categories of taxpayers.
Benefits of Presumptive Income Tax Scheme:
Exemption from maintaining books of accounts: Under the presumptive tax scheme, small taxpayers are relieved from the burden of maintaining detailed financial records, saving time and resources.
No requirement for auditing accounts: Unlike regular taxpayers, individuals availing the presumptive scheme are not obligated to undergo a tax audit.
Simplified advance tax payment: Presumptive taxpayers are not required to assess and pay advance taxes throughout the year since the advance tax is paid by March 15 of the previous year.
Eligibility criteria-driven: The scheme caters to businesses with a turnover of up to ₹1 crore and qualifying professionals with gross receipts of less than ₹50 lakh, ensuring that small taxpayers can benefit from this simplified tax filing method.
Eligibility Criteria for Presumptive Income Tax Filing:
- Businesses with an annual turnover of less than ₹2 crores, opting for an income above 8%.
- If 95% receipts and payouts are done digitally having less than Rs.10 Crores income and opting for an income of below 6%.
- Freelancers and professionals with annual gross receipts of less than ₹50 lakh, estimating their income at 50% or above.
- Individuals with casual income.
How to Register for ITR under the Presumptive Scheme of Taxation:
To avail the Presumptive Taxation Scheme (PTS) and file income tax returns, follow these steps:
- Apply for the presumptive taxation scheme for the assessment year by filing ITR return under PTS for the next five years.
- Gather the required documents, including bank statements, income and expense statements, gross receipts, Form 26AS Tax Credit Statement, and bank statements reflecting interest income above Rs. 10,000/-.
- Ensure that you meet the eligibility criteria, and determine the applicable rate for calculating your income based on the nature of your business or profession.
- Consult a tax professional or use online tax filing services to complete and submit your income tax returns, taking advantage of the simplified tax computation under the PTS.
The Presumptive Income Tax Scheme provides a simplified and efficient method for small businesses and professionals to file their income tax returns. By estimating income based on a predetermined percentage, individuals can save time, eliminate the need for complex bookkeeping, and fulfill their tax obligations with ease. To benefit from this scheme, it is crucial to understand the eligibility criteria, maintain necessary documents, and ensure accurate reporting. Simplify your tax filing process today by embracing the Presumptive Taxation System.
The Presumptive Taxation System is an income tax filing approach where income is calculated based on an estimated or presumptive basis, rather than actual earnings. It simplifies tax compliance for small businesses and professionals by allowing them to claim revenue at a specified rate without the need for maintaining detailed books of account.
The eligibility for the Presumptive Income Tax Scheme depends on the turnover or gross receipts of the taxpayer. Businesses with an annual turnover of less than ₹2 crores and professionals with gross receipts of less than ₹50 lakh can qualify for this scheme.
The key benefits of the Presumptive Income Tax Scheme include:
- Exemption from maintaining detailed books of accounts.
- No requirement for tax audits.
- Simplified advance tax payment.
- Reduced compliance burden for small taxpayers.
: The Income-Tax Act, 1961 specifies various sections related to presumptive taxation. These include:
- Section 44AD: Applicable to businesses (except those involved in specified professions).
- Section 44ADA: Applicable to professionals in specific fields.
- Section 44AE: Applicable to taxpayers engaged in the business of plying, hiring, or leasing goods carriages.
- Section 44BB and Section 44BBB: Applicable to taxpayers engaged in the business of exploration or extraction of mineral oils.
- Section 44B: Applicable to shipping businesses.
No, one of the main advantages of the Presumptive Income Tax Scheme is that individuals opting for this scheme are not required to maintain detailed books of accounts.
To register for income tax returns under the Presumptive Scheme of Taxation, follow these steps:
- Apply to file ITR returns under the Presumptive Taxation Scheme for the next five years.
- Gather the necessary documents such as bank statements, income and expense statements, gross receipts, Form 26AS Tax Credit Statement, and bank statements reflecting interest income above Rs. 10,000/-.
- Consult a tax professional or use online tax filing services to complete and submit your income tax returns, considering the simplified tax computation under the Presumptive Scheme.
The Presumptive Income Tax Scheme is primarily designed for small businesses, professionals, and individuals with casual income. If you have income from multiple sources, it is advisable to consult a tax professional to determine whether you are eligible for the scheme and how to report your income accurately.
Yes, you can switch from the Presumptive Income Tax Scheme to regular taxation in the future. However, once you opt for the Presumptive Scheme, you are required to follow it for a minimum of five consecutive years.
Remember to consult with a tax professional or refer to the official guidelines from the Income Tax Department for specific queries or any recent updates.