Taxpayers earning income from a business or profession and falling under the non-audit category have until August 31, 2026, to file their income tax returns for Assessment Year 2026-27. Taxpayers with GST registration need to be especially careful when reporting turnover and selecting the appropriate ITR form.
As to the income tax return form a taxpayer should file, having a GST registration does not automatically decide the income tax return form. The correct ITR form will depend on the nature of income, books of accounts maintained, eligibility for presumptive taxation, and other relevant conditions.
A change in turnover reporting or a mismatch of GST returns with income tax filings will result in notices and additional compliance issues. Taxpayers should reconcile their records before submitting the return.
Which ITR Form Should Taxpayers With Business Income Use?
Taxpayers earning income from business or profession may generally have to consider ITR-3 or ITR-4 depending on their circumstances.
ITR-3 is applicable to individuals and Hindu Undivided Families (HUFs) having income from a business or profession where income is declared on an actual basis, and the taxpayer maintains the required books of accounts.
Eligible resident individuals and HUFs accepting the presumptive taxation scheme may use ITR-4, subject to all the requirements under the Income Tax Act.
The presumptive taxation provisions can reduce compliance requirements for eligible taxpayers by allowing income to be calculated at prescribed rates instead of requiring detailed computation of actual business expenses.
However, taxpayers should not select ITR-4 just because they have GST registration or because their turnover comes below a certain threshold. In effect, the eligibility for the presumptive scheme should be established based on the provisions.
GST Registration Does Not Decide Your ITR Form
One of the important points taxpayers should recognize is that GST registration and ITR form selection are separate matters.
A person may have a GST number but still need to file ITR-3 depending on the nature of business income and the method used to calculate taxable income.
And simply having a lower turnover does not automatically mean that a taxpayer will be taxed. Other conditions and exclusions have to be taken into account when selecting the section to apply.
Taxpayers should therefore avoid selecting an ITR form solely on the basis of their GST status.
Match GST Turnover to ITR Figures
Another key step before filing is reconciling the turnover reported in GST returns with the turnover disclosed in the income tax return and financial statements.
Taxpayers should compare figures reported in GSTR-1 and GSTR-3B with their books of accounts and ITR.
Any difference should be recognized and reconciled. A difference can occur for genuine reasons such as timing, credit notes, amendments, or differences in the treatment of transactions.
The GST returns annually (GSTR-9 or GSTR-9C, where applicable) may also help taxpayers reconcile GST-related figures with their financial records.
If the taxpayer later receives a query from the tax authorities, keeping proper documentation of any differences can be useful.
GST Component Should Not Be Included in Turnover
Taxpayers also need to ensure that the GST component is excluded from business turnover while calculating income for income tax purposes.
For instance, if a taxpayer is eligible for presumptive taxation under Section 44AD, the taxable income calculation should be based on the relevant sales or turnover figure after excluding the GST component collected on behalf of the government.
Including GST in turnover would artificially inflate the business receipts and may consequently lead to incorrect income numbers.
Taxpayers should therefore examine invoices, GST returns, and accounting records before finalizing their ITR.
Reconcile AIS Before Filing
The Annual Information Statement (AIS) is another important document that taxpayers should check before submitting their return.
The AIS may contain information about financial transactions and income reported by various entities. Taxpayers should compare the information in the AIS with their own books, bank statements, GST records, and other relevant documents.
If there is a mismatch, taxpayers should investigate the reason rather than blindly entering the AIS figure into the ITR.
Reconciliation can identify omissions, duplicate reporting, or other discrepancies before the return is filed.
Common Mistakes To Avoid
Many errors may present problems for business owners, professionals, and freelancers when filing their returns.
One common mistake is that of claiming presumptive taxation despite not meeting the eligibility conditions. Taxpayers need to check the provisions before choosing the presumptive scheme.
Freelancers and professionals should also distinguish between business-related and personal expenses. Personal expenses should not be mischaracterized as professional expenses if it is to lower taxable income.
Taxpayers should also pay attention to losses. The failure to file the return within the prescribed deadline can affect the ability to carry forward some losses, subject to the applicable provisions.
What If You Miss the August 31 Deadline?
For eligible non-audit taxpayers, the original filing deadline is August 31, 2026. However, missing this deadline does not mean that a return cannot be filed.
A belated return can generally be filed by December 31, 2026, if the relevant provisions are satisfied.
But if the filing is not made after the original deadline, then the filing fee and the interest on the unpaid tax will be late.
Taxpayers with total income not exceeding ₹5 lakh will be charged the late filing fee up to ₹1,000. The late filing fee is up to ₹5,000 under the applicable rules if total income exceeds ₹5 lakh.
If tax is left unpaid, interest may also apply under the relevant provisions, including Section 234A, at the prescribed rate.
Key Checks Before Submitting ITR
Taxpayers with business or professional income should verify:
- The correct ITR form based on their income and tax regime.
- Eligibility for presumptive taxation, if applicable.
- Turnover reported in GSTR-1 and GSTR-3B.
- Turnover recorded in books and financial statements.
- Exclusion of GST from turnover for income tax calculations.
- AIS information and other reported income.
- Business and professional expenses.
- Carry-forward losses, wherever applicable.
- Outstanding tax and potential interest liability.
- Supporting documents for substantial differences between GST and ITR figures.
Taxpayers should avoid waiting until the last day of August 31 to finish these checks. A careful reconciliation of GST records, books of accounts, and income tax information can help reduce the risk of errors and unnecessary tax complications.
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