ITR Filing for Traders and Shop Owners: What You Actually Need to Know for FY 2025-26

Every year around this time, we get a flood of calls from shop owners in Sanchore, hardware dealers in Jalore, automobile parts suppliers, and small manufacturers from across the region — all asking the same thing: 'Satyen bhai, kaun sa form bharein? Aur kitne tak chhoot milti hai?'

Totally fair question. Income tax returns are confusing — partly because the government has more forms than flavours of chai, and partly because the rules keep changing every budget. So let's cut through the noise and give you a straight answer for FY 2025-26.

First Things First: Do You Even Need to File?

Yes, if any of the following apply to you:

• ✓Your business turnover exceeds ₹60 lakh in the year
• ✓Your gross income (from business + other sources) exceeds ₹3 lakh if you're a senior citizen, or ₹2.5 lakh otherwise
• ✓You want to claim a refund on TDS that was deducted from your payments
• ✓You took a loan last year and need to show income proof
• ✓You carry forward a business loss to adjust in future years

Even if you don't cross these limits, filing voluntarily is a smart habit. It builds your financial profile, makes loan approvals smoother, and avoids any future hassle from the income tax department.

Which ITR Form Should a Trader or Shop Owner Use?

This is where most people get confused. Here's a simple breakdown:

ITR-4 (Sugam) — The most common form for small businesses

If your turnover is under ₹3 crore (₹75 lakh for professionals like doctors and consultants) and you opt for presumptive taxation under Section 44AD or 44ADA, ITR-4 is your form. It's much simpler than other forms — no detailed balance sheet, no profit and loss statement required.

ITR-3 — For larger or more complex businesses

If you maintain proper books of accounts, your turnover crosses ₹3 crore, or you have losses to carry forward, you'll use ITR-3. This needs a proper balance sheet, P&L statement, and possibly an audit if turnover exceeds the limit.

ITR-1 — Not for business income

Many people mistakenly file ITR-1 even when they have business income. Don't do this. ITR-1 is only for salary earners and those with only rental or interest income.

Presumptive Taxation: The Biggest Tax Benefit Small Traders Often Miss

Section 44AD is one of the most useful provisions in the Income Tax Act for small traders — and one of the least understood.

Here's how it works: instead of maintaining elaborate books and calculating exact profit, you simply declare 8% of your turnover as taxable income (or 6% if most of your receipts are through digital payments like UPI, NEFT, etc.). That's it. The government assumes you made that much profit and taxes you on it.

Let's say you run a kirana shop with ₹80 lakh annual turnover. Under 44AD, you'd declare ₹6.4 lakh (8%) as income and pay tax only on that. If your actual profit was higher, no one's checking — that's the deal. If it was lower, you'd need to opt out of 44AD and maintain books.

This is hugely popular among traders in Sanchore and Jalore because it saves months of bookkeeping and makes tax filing much simpler.

Important caveat: Once you opt out of Section 44AD in a year, you cannot use it again for five consecutive years. So plan carefully before opting out.

Key Deadlines for FY 2025-26

• ✓July 31, 2026 — Last date for ITR filing if no audit is required (non-audit cases)
• ✓September 30, 2026 — Last date for businesses requiring a tax audit (turnover above ₹1 crore for traders, subject to government notifications)
• ✓March 31, 2027 — Belated return last date, with penalty

Missing the July 31 deadline attracts a late fee of ₹1,000 (if income is below ₹5 lakh) or ₹5,000 (if above ₹5 lakh). Beyond penalties, late filers miss out on the right to carry forward certain losses — another reason to file on time.

Documents You'll Need Before You Start

• ✓PAN card
• ✓Aadhaar linked to your PAN
• ✓Bank account statements for the full year
• ✓Sales and purchase records (even rough ones help)
• ✓Form 26AS and AIS (Annual Information Statement) — shows TDS deducted on your PAN
• ✓GST returns filed during the year (GSTR-1, GSTR-3B) — your turnover must match across IT and GST
• ✓Loan account statements if you're claiming interest deductions

One critical step that many traders miss: cross-check your 26AS with your actual income. If TDS has been deducted on payments you received, you can claim those as a credit against your tax liability. This alone often results in a refund.

A Common Mistake That Leads to Notices

In recent years, the Income Tax Department has started sending automated notices where they find a mismatch between GST turnover and income tax turnover. If your GSTR-1 shows ₹1 crore in sales but your ITR shows ₹60 lakh in income, expect a notice.

The numbers don't have to be exactly the same (some sales are exempt from GST or some income doesn't go through GST), but you need to be able to explain every difference. This is something we help clients document and reconcile at Accnotech before filing.

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💬 Filing your ITR correctly the first time saves you from costly notices later. The Accnotech team handles ITR filing for traders, proprietors, and small businesses across Sanchore, Jalore, and Rajasthan. Call +91 87690 72799 or visit accnotech.com.