ITR-3 vs ITR-4 (Sugam): Choosing the Right ITR Form for AY 2025

Filing the correct Income Tax Return (ITR) form is essential to stay compliant and avoid penalties. For business owners, freelancers, and professionals, the biggest confusion often lies between ITR-3 and ITR-4 (Sugam). Here's a clear breakdown to help you make the right choice this year.

What is ITR-3?

ITR-3 is applicable to individuals and Hindu Undivided Families (HUFs) earning income from:

Proprietorship business (not under presumptive taxation)

• Specified professions like doctors, CAs, lawyers, architects, consultants

• Salary plus business/professional income

• Multiple sources such as capital gains, house property, dividends, or foreign assets

Key Features of ITR-3:

Requires maintaining books of accounts and detailed disclosures (Balance Sheet + P&L).
Mandatory if turnover crosses prescribed limits under the Income-tax Act.
Suitable for businesses and professionals not covered under presumptive taxation.

What is ITR-4 (Sugam)?

ITR-4 (Sugam) is designed for small taxpayers opting for the Presumptive Taxation Scheme [Sections 44AD, 44ADA, 44AE]. It can be filed by Resident Individuals, HUFs, and Partnership Firms (except LLPs).

Eligibility for ITR-4:

Business turnover up to ₹2 crore under Section 44AD
Professional receipts up to ₹75 lakh under Section 44ADA
Total income should not exceed ₹50 lakh

Key Features of ITR-4:

Much simpler compared to ITR-3.
No need to maintain detailed books of accounts.
Income can be declared at a fixed percentage (for example, 6%/8% of turnover for business, 50% of professional receipts).
Best for small businesses and professionals preferring easy compliance.

ITR-3 vs ITR-4: At a Glance

ITR-3 is for individuals and HUFs with income from business or profession (non-presumptive), while ITR-4 is for resident individuals, HUFs, and firms (other than LLPs) under presumptive taxation.

ITR-3 has no fixed upper income limit but requires detailed disclosures and books of accounts if turnover crosses audit limits. ITR-4, on the other hand, is restricted to taxpayers with total income up to ₹50 lakh, business turnover up to ₹2 crore, or professional receipts up to ₹75 lakh.

ITR-3 is more detailed and suited for medium to large businesses, multiple income sources, or higher turnover. ITR-4 is simpler and best suited for small taxpayers who prefer easy compliance without maintaining detailed accounts.

How to Choose the Right Form?

File ITR-4 if you are a small business or professional under presumptive taxation, your turnover and income are within limits, and you want to avoid maintaining books.

File ITR-3 if your turnover or professional receipts exceed the presumptive scheme limits, you have income from capital gains, multiple houses, or foreign assets, or you prefer to maintain books and claim actual expenses.

Expert Guidance with JS Financial Services

Choosing the wrong form can lead to notices, penalties, or re-filing. At JS Financial Services, we make ITR filing fast, accurate, and stress-free by: