What is the Difference between ITR 1 and ITR 4?

The purpose of the ITR forms is to present the many financial situations that a taxpayer may encounter. ITR-1 (SAHAJ) and ITR-4 (SUGAM) are two of these frequently used types. They are especially for individuals and Hindu Undivided Families (HUFS). Although they both serve people with particular income levels, their qualifying requirements and filing objectives are very different. I have shared more details on what is the difference between ITR 1 and ITR 4 below for you.

Difference Between ITR 1 and 4

While ITR-4 makes it easier for professionals and small enterprises to comply with presumptive taxation, ITR-1 is a simple form for salaried workers. Here’s the difference between them.

ITR 1 (Sahaj)

1. Applicable to resident individuals only and annual total income must be up to ₹50 lakh.

2. Sources of income:

3. Salary or pension.

4. Income from one house property (excluding losses brought forward from previous years).

5. Income from other sources (e.g., interest, dividends, etc.).

6. Not for individuals with income from business or profession. Not applicable if the taxpayer is a director in a company or holds unlisted equity shares. 

7. Simple for salaried individuals with straightforward income sources.

ITR 4 (Sugam)

1. Applicable to individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) who are residents and income must be up to ₹50 lakh.

2. Covers income under the Presumptive Taxation Scheme:

3. Business income under Section 44AD or 44AE.

4. Professional income under Section 44ADA.

5. Not applicable for non-residents, directors, or individuals owning foreign assets. Not for complex income structures like capital gains or multiple house properties.

6. Suited for small business owners or professionals opting for presumptive taxation to simplify compliance.

This is all about what is difference between ITR 1 and ITR 4.

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Who Should File ITR 1?

There are different types of Income Tax Returns which are filed by individuals, businesses and HUFs. It becomes crucial in that case to understand the difference between various ITRs. I learnt about the difference

between ITR 1 and ITR 4 recently.

Let me help you with the main differences between ITR 1 vs ITR 4:

: ITR 1, also known as Sahaj, is meant for individual taxpayers who have income from salaries, one house property, other sources (excluding winnings from lottery and racehorses), and total income up to ₹50 lakh.

It cannot be used by individuals who have income from business or profession, or who have income from capital gains.

This form is relatively simpler and more commonly used by salaried individuals with income from other sources such as interest income, rental income, or dividends.

: ITR 4, also known as Sugam, is meant for individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) who have presumptive income from business or profession.

It can be used by taxpayers who have income from business or profession computed under the presumptive taxation scheme (Section 44AD, 44ADA, or 44AE) of the Income Tax Act.

Taxpayers eligible to use ITR 4 include small businesses, freelancers, professionals, and individuals engaged in specified businesses such as retail trade, transportation, civil construction, etc.

ITR 4 allows for reporting of both business income and personal income, along with details of deductions and exemptions.

This is ITR 1 vs ITR 4.

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