Is It Compulsory to File ITR-4 for 5 Years?
Is It Compulsory to File ITR-4 for 5 Years?
Complete Guide for Presumptive Income Taxpayers in India
If you’re a small business owner, freelancer, or professional opting for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE, you’ve likely encountered ITR-4.
But many taxpayers have this question:
“Is it mandatory to file ITR-4 for five consecutive years once I opt for it?”
Let’s decode what the Income Tax Act says and what consequences you might face if you don’t stick to the rule.
________________________________________
✅ What Is ITR-4?
ITR-4 (Sugam) is the Income Tax Return form for individuals, HUFs, and firms (other than LLPs) who have:
• Income from business or profession under presumptive taxation scheme (Sections 44AD, 44ADA, or 44AE)
• Total income up to ₹50 lakh
• Income from salary, pension, one house property, and other sources (interest, etc.)
📌 What Is the 5-Year Rule Under Section 44AD?
If you opt for Section 44AD (presumptive income for small businesses), the law says:
“Once you opt for the scheme, you must continue to declare income under this scheme for the next 5 assessment years.”
🔍 Translation:
If you choose ITR-4 and file under Section 44AD in AY 2025–26, you are expected to continue using it till AY 2029–30—unless your turnover exceeds the prescribed limit.
❌ What If You Break the 5-Year Rule?
If you opt out of presumptive taxation before completing 5 assessment years:
• You cannot opt back in for the next 5 assessment years
• You’ll be required to maintain books of accounts under Section 44AA
• You’ll also need to get your accounts audited under Section 44AB if your income exceeds the threshold limits
🎯 Example: FY 2024–25 (AY 2025–26)
Let’s say:
• You opt for presumptive income (ITR-4) in AY 2025–26
• You report business income under Section 44AD
Now, you are bound to continue filing under a presumptive scheme (ITR-4) till AY 2029–30
If in AY 2027–28, you decide not to use ITR-4 and file ITR-3 instead:
• You cannot opt for 44AD again until AY 2033–34
• You must maintain detailed books of accounts
• You may attract audit requirements
📝 Does This Apply to Section 44ADA or 44AE?
The 5-year lock-in rule strictly applies to Section 44AD.
For Section 44ADA (professionals) and Section 44AE (transporters), this condition is not clearly specified in the law, but consistency is still recommended to avoid scrutiny.
Final Words
It is not compulsory to file ITR-4 for 5 years in general.
But if you choose Section 44AD, then yes—you’re obligated to continue for 5 consecutive assessment years. Breaking the cycle can invite an audit, additional compliance, and disqualification from the scheme for the next 5 years.
Confused about your ITR-4 filing obligations?
Our tax experts can help you understand your filing requirements and avoid penalties.
👉 https://callmyca.com/business-tax-filing
