What is the Presumptive Taxation Scheme?

The presumptive taxation scheme simplifies tax compliance for specific individuals and businesses. Normally, under Section 44AA of the Income Tax Act, businesses and professionals are required to maintain detailed accounting records. However, Sections 44AD, 44ADA, and 44AE allow small taxpayers to estimate their income at predetermined rates, reducing the burden of maintaining extensive financial records. The key provisions are:

Section 44AD: This section applies to resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in eligible businesses. It allows them to declare income on an estimated basis, subject to specific conditions.

Section 44ADA: Professionals covered under Section 44AA(1), such as doctors, lawyers, and consultants, can declare their professional income on an estimated basis if they meet the eligibility criteria.

Section 44AE: This provision applies to individuals, HUFs, firms (excluding LLPs), and both resident and non-resident taxpayers engaged in the business of plying, leasing, or hiring goods carriages. If they own up to 10 goods vehicles in the previous year, they can estimate their income under this scheme.

Eligibility Criteria for Filing ITR-4 Sugam

To use the ITR-4 form for the assessment year, taxpayers must meet the following conditions:

Total income should not exceed ₹50 lakh.
Income can include:
Salary or pension earnings.
Rental income from a single house property.
Family pension and/or interest income (taxable under "Other Sources").
Business income (gross turnover up to ₹2 crores) declared under the presumptive taxation scheme.
Presumptive income from goods carriage (up to 10 vehicles).
Professional income under Section 44ADA (gross receipts up to ₹50 lakh) declared on a presumptive basis.