Comparing ITR-3 and ITR-4: Which One is Right for You?

Choosing the right ITR form between ITR-3 and ITR-4 can be confusing for self-employed individuals in India. ITR-3 caters to businesses and professionals who maintain detailed income and expense records. It's ideal for shopkeepers, consultants, freelancers, etc. ITR-4, on the other hand, simplifies ITR filing for those falling under the presumptive taxation scheme. This scheme estimates income based on business turnover, making it suitable for small businesses with basic records.

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Key Takeaways

ITR-3 is for individuals and Hindu Undivided Families with income from profits and gains from business or profession

ITR-4 is for those individuals and HUFs who have opted for the presumptive income scheme

ITR-3 requires detailed information about business income, expenses, and profits, without any approximations

ITR-4 allows taxpayers to declare their income based on prescribed rates, simplifying the calculation process

The presumptive scheme under Section 44AD allows taxpayers to file ITR by estimating their income based on a percentage of their business turnover (sales)

ITR-3 is for businesses with high turnover or complex transactions, while ITR-4 is for simpler businesses

ITR-4 is for small business owners whose turnover does not exceed ₹2 Crores and professionals earning up to ₹50 Lakhs

Frequently Asked Questions
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ITR-3 is for individuals and HUFs with income from profits and gains from business or profession, while ITR-4 is for individuals and HUFs with income from professions and businesses, but with a twist – they have opted for the presumptive income scheme.
ITR-3 can be used by individuals and HUFs with income from a proprietary business or profession, and those who have income from multiple house properties or other sources.
ITR-4 can be used by individuals and HUFs with income from professions and businesses, but with a twist – they have opted for the presumptive income scheme.
The presumptive scheme under Section 44AD allows taxpayers to estimate their income based on a percentage of their business turnover (sales).
ITR-3 requires detailed information about business income, expenses, and profits, leaving no room for approximations, while ITR-4 allows taxpayers to declare their income based on prescribed rates, simplifying the calculation process.
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