ITR-4 Filing Guide AY 2025-26 – Presumptive Taxation (44AD, 44ADA, 44AE) with Examples

1. What is ITR-4?

ITR-4 is for individuals, HUFs, and partnership firms (other than LLPs) who opt for presumptive taxation under:

• Section 44AD – Small businesses
• Section 44ADA – Professionals
• Section 44AE – Transporters

👉 This return is commonly called Sugam ITR and is designed for small taxpayers.

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2. Who Can File ITR-4?

✅ Resident Individual / HUF / Partnership firm (not LLP)
✅ Business turnover up to ₹2 crore (44AD)
✅ Professional receipts up to ₹50 lakh (44ADA)
✅ Transporter with ≤10 vehicles (44AE)

❌ Not eligible if:

• Income > ₹50 lakh
• Capital gains, foreign income, agricultural income > ₹5,000
• Director in company, investing in unlisted shares
• Want to claim loss carry-forward

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3. Presumptive Income Rules

(A) Business – Sec 44AD

• Presumed profit = 8% of turnover (if received in cash)
• Or 6% if receipts are through bank/UPI/cheque
• Turnover limit: ₹2 crore

(B) Professionals – Sec 44ADA

• Presumed profit = 50% of gross receipts
• Limit: ₹50 lakh

(C) Transporters – Sec 44AE

• Presumed profit = ₹1,000 per ton per month (heavy vehicles) OR
• ₹7,500 per vehicle per month (other vehicles)
• Limit: 10 vehicles

👉 In presumptive taxation, no need to maintain books of accounts.

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4. Income Tax Slabs (AY 2025-26)

(A) Old Regime (with deductions like 80C, HRA, etc.)

• 0 – ₹2.5L → Nil
• ₹2.5L – ₹5L → 5%
• ₹5L – ₹10L → 20%
• ₹10L → 30%

Rebate u/s 87A: If total income ≤ ₹5L → Tax = Nil

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(B) New Regime (default – Sec 115BAC)

Revised slabs (w.e.f. AY 2024-25 onwards):

• 0 – ₹3L → Nil
• ₹3L – ₹6L → 5%
• ₹6L – ₹9L → 10%
• ₹9L – ₹12L → 15%
• ₹12L – ₹15L → 20%
• ₹15L → 30%

Rebate u/s 87A: If total income ≤ ₹7L → Tax = Nil

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5. Step-by-Step Filing Process (Online – Income Tax Portal)

1. Login at incometax.gov.in
2. Go to e-File > Income Tax Return > File ITR
3. Select:
   • AY = 2025-26
   • ITR Form = ITR-4
   • Filing Type = Original/Revised
4. Fill sections:
   • Personal info (PAN, Aadhaar, bank details)
   • Income details → presumptive income (44AD/44ADA/44AE)
   • Other income (FD interest, savings interest)
   • Deductions (if opting for Old Regime)
   • Taxes paid (TDS/TCS as per Form 26AS & AIS)
5. Choose Tax Regime (Old/New)
6. Preview & Submit return
7. e-Verify using Aadhaar OTP, Netbanking, or DSC

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6. Example Calculations

Example 1: Businessman (44AD)

• Turnover: ₹40,00,000
• Mode: All digital (6%)
• Presumed Income = 6% × 40,00,000 = ₹2,40,000

👉 Tax under Old Regime: Nil (below ₹2.5L)
👉 Tax under New Regime: Nil (below ₹3L)

✅ No tax payable

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Example 2: Professional (44ADA)

• Gross Receipts: ₹20,00,000
• Presumed Income = 50% = ₹10,00,000

👉 Old Regime:

• Tax = ₹1,12,500 (after slab benefits, before cess, assuming 80C = 1.5L)

👉 New Regime:

• Tax = ₹52,500 (lower, because standard deduction + slab benefit)

✅ Better to choose New Regime

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Example 3: Transporter (44AE)

• 5 small vehicles, owned full year
• Presumed Income = 5 × 12 × ₹7,500 = ₹4,50,000

👉 Old Regime: Nil (rebate 87A up to ₹5L)
👉 New Regime: Nil (rebate up to ₹7L)

✅ No tax payable

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7. Precautions While Filing

⚠️ Ensure turnover/receipts are correctly reported (cross-check with GST if applicable).
⚠️ Verify TDS entries from Form 26AS & AIS.
⚠️ If you opt out of presumptive scheme, you can’t re-enter for 5 years (44AD rule).
⚠️ Keep proof of digital payments to claim 6% rate in 44AD.
⚠️ Choose regime carefully – once chosen, binding for the year.

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8. Final Tips

• Use ITR-4 only if presumptive scheme applies.
• If income is slightly higher than exemption, consider investments under Old Regime.
• Compare both regimes before filing.
• Always e-verify your return to avoid invalidation.

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1. Special Advantage of Presumptive Scheme

Under the presumptive taxation scheme:

• Section 44AD (Business):
  Government assumes 92% turnover is expense + savings, and only 8% (or 6% if digital) is treated as taxable profit.
  👉 This means 92% of turnover is treated as expenses without needing receipts, vouchers, or books of accounts.
• Section 44ADA (Professionals):
  Government assumes 50% of gross receipts are expenses.
  👉 Only 50% is taxable income, even if actual expenses are less.
  👉 You don’t have to maintain invoices, rent slips, travel logs, etc. for deductions.
• Section 44AE (Transport):
  Profit is fixed per vehicle, regardless of actual diesel, maintenance, driver salary, EMI etc.
  👉 All such expenses are deemed included in presumptive scheme.

⚠️ Important: If you declare income less than presumptive %, you must:

• Maintain books of accounts, AND
• Get them audited u/s 44AB,
  which defeats the simplicity.

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2. Example – Professional (Sec 44ADA)

• Gross Receipts: ₹30,00,000
• Expenses (travel, rent, staff salary, laptop, utilities etc.) not tracked with bills.
• Under normal system, you must maintain receipts, and show actual profit.

👉 Under Presumptive (44ADA):

• 50% presumed expenses = ₹15,00,000 (without receipts)
• 50% profit = ₹15,00,000 (taxable income)

📌 Even if your actual expenses are only ₹5 lakh, you still get the benefit of ₹15 lakh expenses allowed automatically.

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3. Example – Business (Sec 44AD)

• Turnover: ₹80,00,000
• If 100% digital → Presumed Profit = 6% × 80L = ₹4.8L
• Deemed Expenses = ₹75.2L (no proof needed)

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4. Practical Benefits

✅ No Receipts / Proof Required – Rent, fuel, internet, staff salaries, repairs etc. are presumed.
✅ No CA Audit – Unless you declare lower profit.
✅ No Complex Books – Only basic records of turnover/receipts.
✅ Tax Savings – You may end up showing higher expenses than actually incurred.

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5. Precautions

⚠️ If you have very high actual expenses (say >50% in profession), presumptive scheme may increase taxable profit compared to actuals.
⚠️ Once you exit presumptive (44AD), you can’t rejoin for next 5 years.
⚠️ Professional (44ADA) – 50% deemed expense is mandatory, you cannot show lower (unless you keep books + audit).

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✅ So the “50% expense without receipts” point applies mainly to professionals (44ADA).
For businesses (44AD), it’s roughly 92% expenses without receipts (only 8%/6% profit taxed).

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