ITR 1 vs. ITR 4: Key Differences, Eligibility & Filing Guide

What is ITR -1?

ITR 1 is a form that is used for filing income tax returns. This form is filed by an assessee whose total income during the previous year includes income from salary, one house property, or pension, agricultural income (up to ₹5000/-) and income from other sources like interest on savings bank and fixed deposits. ITR 1 is also used in cases where a minor or spouse's income is clubbed with the assessee's income. However, this is applicable only if the income of the spouse or minor falls under the heads specified under ITR 1. ITR 1 is also known as Sahaj and applies to individuals having an total income of less than 50 lakhs during the FY.

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Who cannot use ITR-1 Form

• Non-Resident (NRI)
• Not Ordinarily Resident
• Director of a company
• Income from more than one house property or
• Previous Year's brought forward loss from house property
• Income from lottery/race horses/quiz / legal gambling.
• Income under the head "Capital Gains" i.e., short-term capital gains or long-term capital gains from the sale of house, plot, shares, etc.
• Agricultural income exceeding Rs. 5,000.
• Income from business or profession.
• Loss under the head "Income from other sources"
• If you have had investments in unlisted equity shares at any time during the financial year
• Tax deducted under section 194N of Income tax Act
• If total income exceeding ₹ 50 lakh

Further, any such individual who has:

• Claimed relief u/s 90 or 91.
• Any assets or financial interest in any entity located outside India.
• Signing authority in any account located outside India.
• Income from any source outside India. (if you are a resident individual).

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What is ITR-4?

ITR 4, also known as Sugam, is an Income tax return filing form that applies to resident individuals, partnership firms, and HUFs, who have opted for a presumptive tax scheme under sections 44AD and 44AE. It also includes -

• Presumptive income under section 44ADA.
• Income from Salary/Pension, one House Property, Agricultural Income (up to ₹ 5000/-)
• Other Sources which include (excluding winning from Lottery and Income from Race Horses):
  • Interest from Savings Account
  • Interest from Deposit (Bank / Post Office / Cooperative Society)
  • Interest from Income Tax Refund
  • Family Pension
  • Interest received on enhanced compensation
  • Any other Interest Income (e.g., Interest Income from Unsecured Loan)
• Income not exceeding ₹50 Lakh during the FY

The presumptive income scheme allows the assessee to derive his/her income on a presumptive basis as a minimum percentage of the gross receipts during a year.

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Who cannot use ITR-4 Form

ITR-4 cannot be filed by an individual / HUF / Firm (Other than LLP) who:

• is a Resident but Not Ordinarily Resident (RNOR), or Non-Resident Indian
• has total income exceeding ₹ 50 Lakh
• has agricultural income in excess of ₹5,000/-
• is a Director in a Company
• has income from more than one House Property;
• has income of the following nature:
  • winnings from lottery;
  • activity of owning and maintaining race horses;
  • income taxable at special rates u/s115BBDA or Section 115BBE;
• has held any unlisted equity shares at any time during the previous year
• has deferred income tax on ESOP received from employer being an eligible start-up
• is not covered under the eligibility conditions for ITR-4

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ITR 1 vs. ITR 4: Key Differences Explained

Even though ITR 1 and ITR 4 are both used for filing Income Tax Returns, there are a few ways in which they differ from each other. Here are the differences between ITR 1 and ITR 4 -

What are the Components of ITR-1?

ITR 1 consists of 4 different parts -

Part A - General Information

• First Name and Last Name
• PAN number
• Age, communication address
• Date of Birth, gender
• Aadhaar details
• Date of filing the return
• Location of the taxpayer
• Taxpayer’s ward and assessing officer details.

Part B - Gross Total Income

This section consists of the details of the gross income of the assessee. It includes income details from salary, house property, and other sources.

Part C - Total Taxable Income and Deductions

This section of the ITR 1 consists of the details of the total income of the taxpayer and the details of the deductions under sections 80 C, 80 D, 80 U, and 80 G,etc.

Part D - Tax Paid

In the Tax Paid section, you need to confirm taxes paid by you in the previous year. Tax details include TDS from Salary / Other than Salary as furnished by Payer(s), TCS, Advance Tax and Self-Assessment Tax.

Part E - Total Tax Liability

In the Total Tax Liability section, you need to review tax liability computed as per the validated sections.

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What are the Documents Required for Filing ITR 1?

Before you file ITR 1, make sure you have these documents handy -

• Form 16 issued by the employer or salary slips
• Form 26AS
• Proof of investment like FD certificates and details of interest from the bank.

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What are the Components of ITR-4?

Below is the structure of the ITR 4 form -

ITR-4 has six sections that you need to fill before submitting the form in online mode and a preview page where you can validate all your details filled. The sections are as follows:

• Personal Information
• Gross Total Income
• Disclosures and Exempt Income
• Total Deductions
• Taxes Paid
• Total Tax Liability

Here is a quick tour of the various sections of ITR-4:

3.1 Personal Information

In the Personal Information section of the ITR, you need to verify the data which is auto-filled from your e-Filing profile. You will not be able to edit some of your personal data directly in the form. However, you can make the necessary changes by going to your e-Filing profile. You can edit your contact details, filing type details, authorized representative, partner details (if applicable), and bank details in your e-Filing profile.

For AY 2024-25 New Tax Regime is the default Tax Regime. Option “No” will be Auto Selected.

Note: The Finance Act, 2023 has amended the provisions of Section 115BAC to make it the default tax regime for the assessee being an Individual, and HUF . If an assessee does not want to pay tax according to the New tax regime, he will have to explicitly opt out of it and choose to be taxed under the old tax regime.

An assessee having income from a business or profession can opt out of the new tax regime and switch to the old tax regime for a relevant year. However, he has to exercise this option in Form No. 10-IEA on or before the due date for filing the return of income under Section 139(1).

If you want to opt out of New Tax Regime Select “Yes, within due date or Yes, but beyond due date”.

If yes is selected, then Enter the Date of filing and acknowledgement No. of Form 10-IEA and enter the due date applicable for filing of return.

3.2 Gross Total Income

In the Gross Total Income section, you need to review the pre-filled information and verify your income source details from salary / pension, house property, business or profession and other sources (such as interest income, family pension, etc.). You will also be required to enter the remaining / additional details if any.

Note: Some parts of this section will be greyed off depending on whether you're an HUF or a firm (other than LLP).

3.3 Disclosures and Exempt Income

In the Disclosures and Exempt Income section, you need to provide details of financial particulars related to business, information regarding gross receipts reported for GST (Optional) and exempt income.

3.4 Total Deductions

In the Total Deductions section, you need to add and verify any deductions you need to claim under Chapter VI-A of the Income Tax Act.

Please Note:

• Default Regime is New Tax Regime. If you have not opted for Old Tax Regime, only Deductions under Section 80CCD (2)- Employers Contribution to Tier-1 NPS Account and Section 80CCH- amount deposited in the Agniveer Corpus Fund will be enabled.
• If taxpayer is opting old Tax regime and claiming deduction u/s 80DD or 80U then its recommended to file form 10-IA also before filing of return. Form 10IA can be filed later also however it is recommended to file form 10-IA along with return of income to avoid any inconvenience later.

3.5 Taxes Paid

In the Taxes Paid section, you need to verify taxes paid by you in the previous year. Tax details include TDS from Salary / Other than Salary as furnished by the Payer, TCS, Advance Tax, and Self-Assessment Tax.

3.6 Total Tax Liability

In the Total Tax Liability section, you will be able to view your computation of income, computation of tax, and total tax, cess and interest. You need to check your tax liability details as per the sections you filled previously in the computation of tax section.

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What are the Documents Required for Filing ITR 4?

Here are a few prerequisites for filing ITR 4.

• A valid user id and password on the e-filing website
• Active PAN card
• Linked Aadhaar card and PAN card
• Pre-validation with a bank
• Linked mobile with e-filing website

Now that you know all about ITR 1, ITR 4 and their differences, you can simply go ahead and file your ITR. Tax2win tax filing website offers AI- integrated software wherein as oer your income, the tool itself detects the right ITR form for you so that there is no mismatch further. File your ITR with tax2win in less than 4 minutes.

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