ITR-3 vs ITR-4

ITR-3 and ITR-4 are applicable to resident individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) earning income from business or professional activities. However, ITR-4 is specifically meant for those who choose the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE of the Income Tax Act.
 

Let’s simplify this comparison so you can file confidently and avoid unnecessary audits, penalties, or delays in refunds.

Taxpayers who meet the following conditions are eligible to file ITR-3:

Eligibility Criteria for Filing ITR-3

Individuals and Hindu Undivided Families (HUFs) can file ITR-3 if they earn income from a business or profession, where presumptive taxation is not opted. It applies to those having:

• Income from business or profession (both audit and non-audit cases)
• Salary or pension income
• Rental income from house property
• Short-term or long-term capital gains
• Income from other sources such as interest, dividends, or lottery winnings
• Income in the form of interest or remuneration as a partner in a firm

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ITR-4 is a simplified return form for resident individuals, HUFs, and partnership firms (excluding LLPs) who choose the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE.

Eligibility criteria for filing ITR-4:

• Annual income up to Rs. 50 lakhs
• Income from only one house property
• Business or professional income under a presumptive basis
• Capital gains not reportable (Not allowed even under Section 112A)
• Interest and dividend income

If you prefer ease over detailed compliance, ITR-4 is built for you.

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Also Read: ITR-1 vs ITR-4

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Who should file ITR-3?

Choose ITR-3 if you:

• Earn from a proprietary business or profession
• Have income from capital gains, dividends, or multiple house properties
• Maintain books of accounts
• Are subject to audit under Section 44AB
• Are a partner in a firm (excluding LLPs) whose accounts are subject to audit

You must use this form if you don’t qualify for presumptive taxation.

Who should not file ITR-3?

Avoid ITR-3 if you:

• Do not have business/professional income
• Are salaried with no additional income from a business
• Opt for presumptive taxation (use ITR-4 instead)
• Are an LLP, company, or trust—these have separate forms

Who should file ITR-4?

Use ITR-4 if you:

• Are a resident individual or HUF with income up to Rs. 50 lakhs
• Run a small business or practice a profession (like doctors, CA, architects) under presumptive tax
• Own only one house property
• Have additional income from interest or dividends
• Do not hold foreign assets or earn foreign income
• Do not hold unlisted shares

Note: As per the latest Income Tax portal update, you cannot file ITR-4 if you have any capital gains income.

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Who should not File ITR-4?

You’re ineligible for ITR-4 if you:

• Are an NRI or have foreign income/assets
• Hold unlisted equity shares
• Earn income from more than one house property
• Have income exceeding Rs. 50 lakh
• Are a director in a company
• Have capital gains (including from shares or mutual funds)
• Have winnings from lotteries or racehorses

Also Read: ITR-7 Form 

Due Date for Filing ITR-3 and ITR 4 (For Assessment Year 2025-26)

Filing after the deadline? You may face late fees, lose carry-forward benefits, or even trigger scrutiny.

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Section 44AD
Small businesses with an annual turnover of up to Rs. 2 crore can opt for presumptive taxation under Section 44AD. This limit is extended to Rs. 3 crore if at least 95 percent of receipts are through digital modes. Under this scheme, taxpayers can declare 8 percent of turnover as income, or 6 percent for digital receipts, and are not required to maintain detailed books of accounts. This provision applies mainly to traders and manufacturers and does not cover professionals or transport businesses governed by Section 44AE.

Section 44ADA
Specified professionals with annual gross receipts of up to Rs. 50 lakh can choose this scheme. From FY 2024–25 onwards, the limit increases to Rs. 75 lakh if 95 percent or more receipts are digital. Under this section, 50 percent of gross receipts is treated as taxable income. Eligible professions include legal, medical, engineering, architectural, accounting, technical consultancy, interior decoration, information technology, company secretarial services, authorised representatives and film artists.

Section 44AE
This scheme applies to taxpayers engaged in the business of plying, hiring or leasing goods carriages, provided they own not more than 10 goods vehicles at any time during the financial year.

Choosing between ITR-3 and ITR-4 depends on how you earn, how much you earn, and whether you want to simplify filing or go in-depth. ITR-3 offers wider coverage but demands more documentation. ITR-4 simplifies things, but only for those who meet its criteria.

Evaluate your income streams, reporting complexity, and compliance capacity—and choose the return form that works best for you.

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