Confused between ITR 1 and ITR 4 for FY 2024-25? Discover the key differences, eligibility, and expert tips to choose the correct form for income tax return filing.
Introduction
If you're preparing to file your income tax return in India for FY 2024-25, choosing the correct Income Tax Return (ITR) form is essential. Two of the most commonly used forms are ITR 1 (Sahaj) and ITR 4 (Sugam). While both are designed for individuals with relatively simple tax profiles, they cater to different types of income and taxpayers. Filing the wrong ITR form can lead to rejection or notice from the Income Tax Department, delaying your refund or attracting penalties.
In this article, we will break down the differences between ITR 1 and ITR 4, help you understand the eligibility criteria for each, and guide you on how to pick the right form with confidence. This guide is fully updated for FY 2024-25 and AY 2025-26, and is aligned with the latest income tax rules notified by the Central Board of Direct Taxes.
What is ITR 1 (Sahaj)?
ITR 1, commonly referred to as Sahaj, is for resident individuals who earn income from:
- Salary or pension
- One house property (excluding losses brought forward)
- Other sources (excluding lottery, racehorses, etc.)
It is meant for individuals with a total income of up to ₹50 lakh and no business or professional income.
What is ITR 4 (Sugam)?
ITR 4, or Sugam, is applicable for resident individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) opting for the presumptive income scheme under Sections 44AD, 44ADA, or 44AE. It is suitable for small business owners, freelancers, and professionals whose income is presumed and not maintained via formal books of accounts.
Tabular Comparison: ITR 1 vs ITR 4 (FY 2024-25)
| Feature | ITR 1 (Sahaj) | ITR 4 (Sugam) |
|---|---|---|
| Applicable to | Resident individuals only | Resident Individuals, HUFs, Firms (Non-LLP) |
| Total Income Limit | Up to ₹50 lakh | Up to ₹50 lakh (professionals) / ₹2 crore (business) |
| Income Source | Salary, Pension, One House Property, Other Sources | Business & Profession (Presumptive), One House Property, etc. |
| Business/Professional Income | Not allowed | Allowed under presumptive taxation |
| Foreign Income / Assets | Not allowed | Not allowed |
| Agricultural Income | Up to ₹5,000 only | Up to ₹5,000 only |
| Maintenance of Books Required? | No | No, if opting for presumptive taxation |
| Form Type | Simple | Slightly detailed |
Who Should File ITR 1?
You should file ITR 1 if all the following conditions are met:
- You are a resident individual (not HUF or company).
- Your total income does not exceed ₹50 lakh.
- Your sources of income are limited to:
- Salary/pension
- One house property
- Other sources (excluding lottery winnings or racehorses)
You should not use ITR 1 if:
- You have income from capital gains, business, or professional services.
- You have foreign income or own foreign assets.
- You are a director in a company or hold unlisted equity shares.
- You claim double taxation relief under DTAA.
You can verify more on the official income tax e-filing portal where these eligibility rules are clearly stated and updated regularly.
Who Should File ITR 4?
Choose ITR 4 if:
- You are a resident individual, HUF, or a firm (non-LLP).
- You have opted for presumptive taxation under:
- Section 44AD: Small businesses
- Section 44ADA: Professionals like doctors, CA, consultants
- Section 44AE: Owners of goods vehicles
- Your total income is up to ₹50 lakh for professionals, or ₹2 crore for businesses.
- You do not maintain formal books of accounts and prefer simplified taxation.
Avoid ITR 4 if:
- Your income is from speculative business (like intraday stock trading).
- You earn income from foreign assets or are an NRI.
- You need to claim depreciation or carry forward losses.
Common Scenarios: ITR 1 vs ITR 4 — Which One Should You File?
Taxpayers often get confused when they have overlapping income types or are eligible under presumptive taxation but also earn salary. Let’s look at some real-world examples to understand which form applies best.
Scenario 1: Salaried Employee with No Business Income
✅ You are a software engineer earning ₹15 lakh per year and have no other source of income except a savings account.
➡ Use ITR 1 – You are a perfect fit under the criteria.
Scenario 2: Freelancer Graphic Designer Earning ₹18 Lakh/Year
✅ You work on Upwork and Fiverr and want to file under Section 44ADA.
➡ Use ITR 4 – You are a professional eligible under presumptive taxation.
Scenario 3: Salaried Person with Small Side Business (Turnover ₹18 lakh)
✅ You work full-time and sell handmade products on Instagram/Shopify.
➡ Use ITR 4 – If you opt for presumptive taxation for your side business, ITR 4 is applicable.
Scenario 4: You Have Income from Multiple House Properties
❌ ITR 1 allows only one house property.
➡ You should file ITR 2 or ITR 3 depending on other income sources.
Major Differences in Tax Computation: ITR 1 vs ITR 4
One of the biggest technical differences lies in how income is computed in these two forms.
| Aspect | ITR 1 | ITR 4 (Presumptive Taxation) |
|---|---|---|
| Income Calculation | Actual income based on salary slips, Form 16 | Presumed percentage of gross receipts (e.g. 50% for professionals) |
| Deductions Under Chapter VI-A | Allowed | Allowed |
| Depreciation Claim | Not applicable | Not applicable (under presumptive) |
| Books of Accounts | Not required | Not required |
| Audit Requirement | No | No, if income < limit and presumptive used |
Under Section 44ADA, professionals like consultants, architects, interior designers, doctors, and engineers can declare 50% of their gross receipts as income and pay tax on that without maintaining formal accounts or getting audited. This reduces compliance burden.
To verify who qualifies under presumptive schemes, refer to the official Income Tax Presumptive Taxation Guide.
Latest Updates for FY 2024-25 You Must Know
Here are some critical updates that taxpayers must be aware of while filing their returns this year:
1. No Change in Income Limits for ITR 1 & ITR 4
The total income threshold remains unchanged at ₹50 lakh for both ITR 1 and ITR 4. For businesses under presumptive scheme (Section 44AD), the limit remains ₹2 crore.
2. New Tax Regime as Default (from FY 2023-24)
From FY 2023-24 onwards, the new tax regime is the default option, unless the taxpayer opts out. Both ITR 1 and ITR 4 allow you to choose between the old and new regimes.
| Regime | Key Highlights |
|---|---|
| Old Tax Regime | Allows deductions under 80C, 80D, HRA, etc. |
| New Tax Regime | Lower tax slabs but no deductions |
To know which tax regime is beneficial, you can use comparison calculators like those available on Gov.in or authorized tax portals like Taxpayer Portal by Income Tax India.
3. New Section 139(8A) - Updated Return Filing
This section allows filing an updated return within 24 months, giving more flexibility to taxpayers who might have missed reporting certain income.
Mistakes to Avoid While Choosing Between ITR 1 vs ITR 4
Incorrectly selecting an ITR form can result in:
- Return being declared defective under Section 139(9).
- Delays in refund processing.
- Notices or scrutiny from Income Tax Department.
Here are the top mistakes to avoid:
- Filing ITR 1 despite having business or professional income.
- Selecting ITR 4 when your income doesn’t fall under presumptive taxation.
- Not checking for foreign income or asset ownership (both ITR 1 and ITR 4 don’t allow it).
- Mixing multiple house properties with ITR 1.
- Ignoring the audit requirement if your presumptive income is below 8% (cash) or 6% (digital) and turnover exceeds ₹2 crore.
Key Eligibility Rules – ITR 1 vs ITR 4 (FY 2024-25)
Understanding the eligibility rules for ITR 1 and ITR 4 is crucial to ensure a compliant and smooth filing process. Many taxpayers make the mistake of assuming these forms are interchangeable, which they are not.
ITR 1 (Sahaj) – Eligibility Checklist
You can file ITR 1 if all the following apply:
- You are a Resident Individual (Not HUF or Non-resident).
- Your total income does not exceed ₹50 lakh.
- Your income includes:
- Salary or Pension
- One House Property
- Interest income from deposits, savings, etc.
- Your agricultural income (if any) is not more than ₹5,000.
You cannot file ITR 1 if:
- You are a Director in a company.
- You hold unlisted equity shares.
- You have foreign assets or foreign income.
- Your income includes capital gains.
- You earn from business or professional activity, even if it’s small.
ITR 4 (Sugam) – Eligibility Checklist
You can file ITR 4 if:
- You are an Individual, HUF, or a Firm (other than LLP).
- You are a Resident of India.
- You earn income under presumptive taxation (Sections 44AD, 44ADA, 44AE).
- Your total income is within ₹50 lakh, and gross receipts:
- Do not exceed ₹2 crore (business under 44AD).
- Do not exceed ₹50 lakh (professionals under 44ADA).
You cannot file ITR 4 if:
- You are an NRI or non-resident.
- You have more than one house property.
- You own foreign assets or receive foreign income.
- You want to claim capital gains or depreciation.
- Your income involves speculative business, lottery, or horse racing.
You can double-check the latest eligibility matrix and ITR selection guide as published by the Income Tax India Help Center.
Which Form is Simpler to File?
While both forms are designed for simplicity, ITR 1 is comparatively simpler due to the limited income types involved. ITR 4, although still straightforward, involves presumptive income calculation which might need a bit of planning.
| Factor | ITR 1 | ITR 4 |
|---|---|---|
| Length of the form | Short | Slightly longer |
| Data Entry Effort | Minimal | Moderate (requires turnover input) |
| Common Filing Method | Online via e-filing portal | Online, or via XML upload |
| Taxpayer Type | Salaried, pensioners | Freelancers, shop owners, drivers |
Both ITR 1 and ITR 4 can be filed without the help of a CA, thanks to the pre-filled data system introduced by the Income Tax Department. This makes the return filing process faster and reduces errors.
Benefits of Choosing the Right Form
Filing the correct ITR form is not just about compliance—it also helps:
- Avoid unnecessary scrutiny or notices.
The wrong form triggers red flags in the system, potentially causing delays in processing or requiring re-filing. - Speed up refund processing.
If your return is error-free and the correct form is used, refunds can be issued in as little as 7–10 days. - Maximize deductions and exemptions.
The right form allows you to accurately report eligible deductions like 80C, 80D, and 80G. - Prevent future legal complications.
Misreporting income or hiding foreign assets due to form restrictions can lead to penalties or prosecution.
Use-Cases When Taxpayers Accidentally Use the Wrong Form
Many Indian taxpayers, especially first-time filers or gig workers, accidentally choose ITR 1 when they should file ITR 4. Here are some real-world cases:
| Case | Mistaken ITR | Correct ITR | Why |
|---|---|---|---|
| Salaried employee with ₹60,000 freelance income | ITR 1 | ITR 4 | Business income reported |
| Blogger with ad revenue under ₹15 lakh | ITR 1 | ITR 4 | Income from profession |
| Ola/Uber driver with presumptive income | ITR 1 | ITR 4 | Falls under 44AE |
It's always safer to review your income types and sources. Tools like the ITR selection wizard available on platforms like ClearTax, IncomeTax.gov.in, or authorized intermediaries can help automate this decision accurately.
Comparison of Deduction Claims in ITR 1 vs ITR 4
While both forms allow standard deductions and Chapter VI-A claims, there are nuances based on the income type and tax regime chosen.
Let’s look at how deductions are treated in both forms:
| Deduction Type | ITR 1 (Salaried) | ITR 4 (Presumptive) |
|---|---|---|
| Standard Deduction ₹50,000 | Automatically applied under salary | Not applicable (unless there's salary income too) |
| Section 80C (e.g., LIC, PPF) | Allowed | Allowed |
| Section 80D (Health Insurance) | Allowed | Allowed |
| Section 80G (Donations) | Allowed | Allowed |
| Professional Expenses | Itemized under ITR 3 only | Not applicable (flat-rate income applied) |
For presumptive income filers under ITR 4, the Income Tax Department assumes a fixed profit margin (50% for professionals under Section 44ADA), hence no further business expense claims are allowed. However, personal deductions under Chapter VI-A still apply.
To view the complete list of eligible deductions and their limits, taxpayers can refer to the Government of India’s official deduction chart.
Choosing Between Old vs New Tax Regime in ITR 1 and ITR 4
Both ITR 1 and ITR 4 allow you to select your tax regime—but the impact on your deductions is significant.
| Feature | Old Tax Regime | New Tax Regime |
|---|---|---|
| Deduction under 80C/80D | Available | Not available |
| HRA and LTA | Available | Not available |
| Tax Slabs | Higher slabs, more deductions | Lower slabs, no deductions |
| Standard Deduction (₹50,000) | Available | Available (from AY 2024-25 onward) |
If you have multiple deductions like housing loan interest, PPF, ELSS, and health insurance, the old regime under both ITR 1 and ITR 4 is often more beneficial. However, those with fewer deductions and simpler income profiles may benefit from the new regime due to its lower tax rates.
The official tax regime comparison tool can help evaluate the better option based on your financial details.
Digital Filing Process: ITR 1 vs ITR 4
The filing experience varies slightly between ITR 1 and ITR 4, especially if you're uploading JSON files, using Excel utilities, or pre-filled online portals.
ITR 1 Filing Options:
- Online via Income Tax portal with pre-filled data
- Offline JSON utility
- Third-party software (ClearTax, TaxBuddy, etc.)
ITR 4 Filing Options:
- Same as ITR 1, but additional field for gross receipts
- Declaration under presumptive section
- Must verify income source (business vs profession)
Both forms now come with smart assistance features like pre-filled PAN, Aadhaar, bank accounts, and salary details fetched from Form 26AS and AIS.
If you're a salaried or small business taxpayer, e-filing has become easier than ever due to these integrated systems. You can review your pre-filled data before submission on the official Income Tax e-Filing portal.
When to Opt for Professional Help
Although both forms are simplified, here are some situations where you should consider professional tax assistance:
- Freelancers earning from multiple countries/platforms (requires clarity between professional and foreign income).
- You switched between employment and freelancing during the same financial year.
- Turnover nearing ₹2 crore, and you're unsure whether to go for ITR 4 or ITR 3.
- You want to file under presumptive taxation but also claim depreciation or capital gains—in this case, ITR 3 may be more appropriate.
CA-assisted filing ensures compliance with evolving tax rules, especially for gig workers and digital creators. You may also benefit from strategic tax planning.
Penalties for Filing Wrong ITR Form
Filing an incorrect form such as ITR 1 when ITR 4 is applicable—or vice versa—can have serious implications. The Income Tax Department may treat your return as defective under Section 139(9), leading to:
- Return being declared invalid.
- Requirement to file a revised return within a specific timeframe.
- Possible penalty under Section 270A for under-reporting income.
- Delay in refund processing or rejection of refund claim.
In such cases, the tax department may issue a notice for explanation, and you’ll need to correct the error and refile using the correct form. More details on consequences and corrective actions are available in CBDT circulars and FAQs published on the Income Tax portal.
Presumptive Taxation: Should You Really File ITR 4?
The presumptive scheme under Sections 44AD, 44ADA, and 44AE simplifies tax filing by allowing you to pay tax on a fixed percentage of turnover, without maintaining books of accounts.
| Section | Applicable To | Presumptive Rate | Turnover Limit |
|---|---|---|---|
| 44AD | Businesses | 6% (digital), 8% (cash) | Up to ₹2 crore |
| 44ADA | Professionals (CA, doctors) | 50% of gross receipts | Up to ₹50 lakh |
| 44AE | Transporters (trucks, etc.) | ₹7,500 per vehicle/month | Upto 10 vehicles |
If you qualify under these sections, ITR 4 offers a quick, no-hassle filing experience. However, if your actual expenses are higher than the presumptive limit and you want to declare lower profit, you’ll need to file ITR 3 and maintain books of accounts.
For individuals exploring this regime, a detailed explanation is available on the National Portal of India.
Summary Table – ITR 1 vs ITR 4 (Quick Comparison)
| Feature | ITR-1 (Sahaj) | ITR-4 (Sugam) |
|---|---|---|
| Eligible Assessee | Resident Individuals (not ordinarily resident excluded) | Resident Individuals, HUFs, and Firms (other than LLPs) |
| Income Limit | Total income up to ₹50 lakh | Total income up to ₹50 lakh (from salary, house property, other sources) and presumptive income up to ₹2 crore |
| Income Types Allowed | Salary/Pension, One House Property, Other Sources (excluding lottery, etc.) | Presumptive income from Business and Profession under sections 44AD, 44ADA, or 44AE |
| Capital Gains | Not Allowed | Not Allowed |
| Foreign Income / Assets | Not Allowed | Not Allowed |
| Multiple House Properties | Not Allowed (only one house property) | Not Allowed |
| Presumptive Taxation | Not Applicable | Applicable and Mandatory under Sections 44AD, 44ADA, 44AE |
| Ease of Filing | Very High (simple form) | High (requires income computation under presumptive scheme) |
| Books of Accounts Required | No | No (if conditions under presumptive scheme are met) |
Final Verdict: ITR 1 vs ITR 4 – Which One Should You File?
Choosing between ITR 1 vs ITR 4 boils down to your income type, profession, and compliance preferences.
- File ITR 1 if you are a salaried individual or pensioner with limited income sources and no business activities.
- File ITR 4 if you’re a freelancer, shop owner, consultant, or transporter earning income under presumptive taxation with no foreign assets or capital gains.
Always double-check your eligibility before choosing the form. Misfiling can lead to rejection, delayed refunds, or compliance complications. If you’re ever unsure, it's advisable to consult a registered tax professional or use trusted platforms like NSDL e-Gov or the official e-Filing portal.
FAQ
What is the main difference between ITR 1 and ITR 4?
ITR 1 is for salaried individuals with simple income, while ITR 4 is for freelancers or businesses under presumptive taxation.
Can a freelancer file ITR 1?
No, freelancers must use ITR 4 if under presumptive taxation or ITR 3 if maintaining books of accounts.
Is ITR 4 allowed under the new tax regime?
Yes, ITR 4 can be filed under the new regime, but most deductions like 80C, 80D are not available there.
Can I file ITR 1 if I have income from business?
No, ITR 1 cannot be used if you have any income from business or profession. ITR 4 or ITR 3 is required.
What is the income limit for filing ITR 4?
ITR 4 is for income up to ₹50 lakh (non-business) and up to ₹2 crore from business/profession under presumptive scheme.
Can salaried people file ITR 4?
Only if they have both salary and presumptive business income. Otherwise, use ITR 1 for only salary income.
Do I need books of accounts to file ITR 4?
No, under the presumptive taxation scheme, you don't need to maintain books if you file ITR 4.
Which ITR form is best for small shopkeepers?
Small shopkeepers with turnover up to ₹2 crore can file ITR 4 under the presumptive scheme (Section 44AD).
What happens if I file the wrong ITR form?
Filing the wrong ITR form may lead to defective return notices. You must refile with the correct form to avoid penalties.
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