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

ITR-3

ITR-3 can be used by individuals, HUFs, and Partners in a Firm. Any person having income from the following sources should use ITR-3 to file their ITR.

• If you have income from a proprietary business or profession and not opting for presumptive taxation, you can use ITR-3.
• If you have income from partnership firms, holding Directorship in a company or holding unlisted equity shares, or have crypto income, you can use ITR-3.
• If you have income from any other sources besides salary, more than one house property, and capital gains, and if your income is chargeable to tax under the head "Profits and Gains of Business or Profession," you can use ITR-3.
• ITR-3 is not applicable for individuals with income only from salary, house property, and capital gains. For such cases, ITR-1, ITR-2, or ITR-4 may be applicable depending on the nature and amount of income.

Due date to file ITR-3 for FY 2022-23

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ITR-4

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

• You are a resident individual, HUF, or partnership firm with a total income of up to Rs. 50 lakhs and you have opted for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE of the Income Tax Act.
• If you have income from a single proprietorship business or profession, ITR-4 is applicable to you.
• You can use ITR-4 if you have income from the following sources:
  • Business or profession (presumptive income under section 44AD, 44ADA, or 44AE),
  • Salary or pension
  • One house property (excluding brought forward losses),
  • Other sources (excluding winnings from lottery and income from horse races),
  • Exempt income. However, Agriculture income only upto Rs.5000 limit

*Section 44AD - Under this section, taxpayers having upto Rs 2 crore of turnover are not required to maintain books of accounts and declare 8% or 6%(in case of online transactions) of their turnover as profits. This scheme benefits small taxpayers who get relieved from maintaining the books of accounts and get them audited.

Note: In the Budget 2023, the finance minister proposed to increase the limit under section 44AD for businesses to Rs 3 crore, and the limit under section 44AE for professionals has been increased to Rs 75 lakh with the condition that if your cash transaction is upto 5% of turnover
And also if the amount received by cheque or bank draft which is not account payee shall be deemed as amount received in cash.

**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. This limit was revised in the Budget 2023. So the new limit is Rs.75 lakhs -

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

Movie artists include a editors, actors, directors, music directors, art directors, dance directors, cameramen, singers, 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 or
any other notified professionals.

***Section 44AE - This section applies 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 learn about the method of income computation from here.

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Difference between ITR-3 & ITR-4

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Examples

• Akshay runs a cloth retail shop and has opted for the Presumptive Taxation Scheme.
  In this case, Akshay can choose to file either ITR 3 or ITR 4 (if his gross turnover is less than Rs.2 crore.
• Neha is an interior designer and doesn’t know which ITR form to file.

As a professional, if her gross receipts are less than Rs.50 lakhs, she can choose the presumptive income scheme and file ITR 4.

Now that you know the difference between ITR 3 and ITR 4, you must have figured out which ITR Form to file. If you are still confused about which ITR form to choose, you don’t have to worry. Our AI-integrated DIY ITR filing portal is smart enough to choose the appropriate ITR form automatically and even pre-fill most of your data to make your ITR filing journey smooth. Or you can also take assistance from qualified and experienced CAs through our eCA service.
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