The Income Tax Return (ITR) Form 4, also known as Sugam, is a simplified form aimed at small taxpayers who have opted for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act. While this form is beneficial for many, certain individuals are not eligible to file ITR-4. Here’s a detailed look at who cannot use this form:
Directors in a Company
Individuals who hold the position of a director in any company are not permitted to use ITR-4. This restriction ensures that directors, who often have complex financial and tax situations, file the more detailed ITR forms appropriate for their status.
Holders of Unlisted Equity Shares
If you have held any unlisted equity shares at any point during the previous financial year, you cannot file ITR-4. Unlisted equity shares indicate a stake in a private company, which involves more intricate tax calculations and disclosures.
Owners of Assets Located Outside India
Individuals possessing any assets, including financial interests, located outside India, are barred from using ITR-4. This includes properties, bank accounts, or any other financial interests abroad. The complexities of international tax laws necessitate more detailed reporting than what ITR-4 offers.
Signing Authority in Foreign Accounts
Those with signing authority in any account located outside India must refrain from using ITR-4. Such accounts require comprehensive reporting due to regulations on foreign assets and income, which ITR-4 does not cover.
Income from Sources Outside India
If you earn any income from foreign sources, you are not eligible to use ITR-4. Foreign income typically involves additional documentation and compliance, necessitating more elaborate forms.
Deferred Tax on Employee Stock Option Plans (ESOPs)
Individuals who have deferred payment or deduction of tax on ESOPs cannot use ITR-4. Deferred tax situations add a layer of complexity that ITR-4 is not designed to handle.
Brought Forward or Carried Forward Losses
If you have any losses brought forward from previous years or losses to be carried forward under any head of income, you must use a different ITR form. The ITR-4 does not accommodate the detailed loss calculations and carry-forward provisions.
Total Income Exceeding Rs. 50 Lakhs
Individuals with a total income exceeding Rs. 50 lakhs in a financial year are not allowed to file ITR-4. Higher income levels generally involve more complex tax scenarios that require detailed reporting.
Key Points to Note:
- Voluntary Use: Form ITR-4 (Sugam) is optional and intended for those eligible to declare their Profits and Gains from Business or Profession on a presumptive basis under Sections 44AD, 44ADA, or 44AE.
- Simplified Form: It simplifies the return filing process for small taxpayers by reducing the compliance burden. However, it is crucial to ensure you meet the eligibility criteria to avoid complications.
Conclusion
While ITR-4 offers a simplified and streamlined process for eligible taxpayers, it is vital to understand the specific conditions under which it cannot be used. Individuals with complex financial situations, significant foreign connections, or higher income levels must resort to other ITR forms to comply with tax regulations accurately. Always consult with a tax professional to determine the most appropriate form for your financial circumstances.
