Who can file ITR 3 & ITR 4? Difference between ITR 3 & ITR 4

ITR-3

ITR-3 can be used by the individuals & HUFs who have earned income from business/profession during a financial year. Any person having income from the following sources should use ITR-3 to file their ITR.

• Business or profession (for tax audit & non-tax audit cases)
• May include income from house property, salary/ Pension, Capital gain, other sources.

Please note that the due date to file ITR-3 for the taxpayers eligible for tax audit for the FY 2020-21 has been extended to 30th November 2021. Also, the threshold for tax audit has been increased to Rs 5 crore from Rs 1 crore (And in budget 2021 such limit has been increased from 5 crore to 10 crore for FY 2021 - 22). If the cash receipts do not exceed 5% of the gross receipts or turnover and cash payment do not exceed 5% of the aggregate of all the payments during the year.

ITR-4

ITR-4 can be used by a Resident Individual / HUF / Firm (other than LLP) who has income:

• Upto Rs 50 Lakh in a financial year
• From Business and Profession computed under presumptive taxation scheme u/s 44AD*, 44ADA** or 44AE***
• From salary/pension, one house property, agricultural income (up to Rs 5000)
• From other sources that include (excluding winning from lottery and income from race horses):
  1. Interest from a savings account
  2. Interest from the deposit (Bank / Post Office / Cooperative Society)
  3. Interest from income tax refund
  4. Family pension
  5. Interest received on enhanced compensation
  6. Any other interest income (e.g., interest income from unsecured loan)

*Section 44AD - Under this section, taxpayers’ with less than Rs 2 crore of turnover are not required to maintain books of accounts and declare 8% or 6% of their turnover as profits. This scheme is beneficial for small taxpayers who get relieved from maintaining the books of accounts and get them audited.

**Section 44ADA - Under this section, profits from certain professions are presumed at 50% of the gross receipts. Section 44ADA will apply to the following professions only if their gross receipts are up to Rs 50 lakh in a financial year -

• Interior decorations
• Technical consulting
• Engineering
• Accounting
• Legal
• Medical
• Architecture
• Other professionals, as mentioned below:

  Movie artists include a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer and costume designers

  Authorised representative means a person representing another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so represented or a person who is carrying on the profession of accountancy

  Any other notified professionals

***Section 44AE - This section is applicable to the taxpayers engaged in the business of plying, hiring or leasing goods carriages and does not own more than 10 goods vehicles at any time during the financial year (Declare their income in the scheme at Rs 7500 per vehicle per month). Taxpayers can know about the method of income computation from here.