ITR Filing: Zero income tax on earnings of ₹20 lakh! Is it legal? Reddit post sparks debate

ITR Filing: With about a month left for filing the income tax return, taxpayers have gotten busy with their ITR preparations. As this ITR filing season gains momentum, a Reddit post that claims tax liability on an income of ₹20 lakh can be reduced to zero while filing ITR 4 has sparked a debate. A user, who goes by ‘Mayand69’, posted a query seeking help in filing ITR for his father, who is an advocate in a civil court.

“Just a small query here, any qualified personnel please help.

My father is an advocate (independent) in Civil Court. I have a small query while filling his returns.

ITR 3: Gross total receipt: INR 20,00,000 and he has close to no professional expense. So his tax liability roughly comes as 3,00,000 under new tax regime.

ITR4: Gross Total Receipt: INR 20,00,000 According to 44ADA presumptive scheme he can claim 50% as expense so his profit comes down to INR 10,00,000. Now his tax liability becomes 0 under new tax regime.

So, isn’t it a loss for the IT Department? Is it legal? I am genuinely seeking help as I have zero knowledge about this. Or am I going wrong somewhere?”

Tax liability won’t be zero!

Since the taxpayer is an advocate, he is eligible to file ITR 4. It can be filed by anyone who is eligible to declare Profits and Gains from Business or Profession on a presumptive basis under Section 44ADA. The presumptive tax scheme allows professions such as lawyers, doctors, freelancers and so on to pay income tax on just half of their professional income, which reduces their tax liability significantly, which can be zero in select cases.

“Under Section 44ADA, if any specified professional has the gross receipts of ₹20 lakh (as per example), they must declare income equal to either 50% of their gross receipts or their actual income, whichever is higher. Those opting for this scheme are not required to maintain detailed books of accounts for expenses if the annual gross receipts are under ₹50 lakh,” said Abhishek Soni, CEO, Tax2Win.

“In the given example, if the taxpayer avails the benefit under Section 44ADA, his taxable income will come down to ₹10 lakh. That being said, if he opts for the new tax regime, his tax liability won’t be zero. As per the new tax regime for FY25, for those who fall in the ₹7-10 lakh income bracket, a 10% tax rate is applicable. On the other hand, those who earn ₹20 lakh and do not qualify for the Section 44ADA benefit, their taxable income and tax slab would be higher, leading to a greater tax outgo,” Soni explained.

It may be noteworthy that the zero income tax on income up to 12 lakh is applicable on returns filed for FY26, not FY25, if the individual meets the criteria.