New Income Tax Business Code in ITR Forms
Filing your Income Tax Return (ITR) correctly is more than just reporting your income. It’s about ensuring that every detail — including the Income Tax Business Code — is in line with the latest updates issued by the Income Tax Department. One small mistake, such as selecting the wrong business code, can lead to confusion, notices, or even penalties.
In this blog, we will explore the updated Income Tax Business Codes for AY 2024–25 and AY 2025–26, discuss why these changes matter, provide a guide on selecting the right code, and outline common mistakes to avoid. The correct business code helps classify your nature of business or profession, which is crucial for tax compliance and record-keeping. For the latest updates and expert financial tips, keep following My Finance Gyan.
What is an Income Tax Business Code?
The Income Tax Business Code is a 3–5 5-digit numeric code used while filing ITR forms to describe the nature of your business or profession. This code helps the Income Tax Department to categorize your business type and assess your income accordingly.
For example, a retail shop, a medical professional, or a digital freelancer — all will have separate business codes depending on their income source and business structure.
Purpose of Income Tax Business Code:
- Helps in systematic classification of businesses
- Enables better income assessment and scrutiny
- Mandatory for anyone filing ITR-3 or ITR-4 under business/professional income
Why Has the Income Tax Business Code Changed?
The Income Tax Department frequently updates the list of business codes to align with:
- New types of professions and digital businesses
- Changes in GST classification norms
- Improved clarity and reduced duplication of categories
Many freelancers and small business owners were previously confused by outdated codes. The new list for AY 2024-25 and 2025-26 is better structured and more inclusive, especially for professionals offering online services or hybrid models (like consulting + trading). This update also bridges the classification gap between GST codes (HSN/SAC) and income tax business categories — making it easier to match your GST filings with your ITR.
New Income Tax Business Code List for AY 2024-25/2025-26:
Key Highlights of the New List:
- Clearer division across Manufacturing, Trading, and Services
- Specific codes for IT services, Influencers, Freelancers, Consultants
- Categories aligned with digital economy growth
Major Categories Include:
- Manufacturing: Textile, pharma, electronics, food products
- Trading: Retail (online/offline), wholesale, distributors
- Professionals: Doctors, Lawyers, CA/CS, IT Consultants
- Other Services: Online educators, bloggers, digital marketers
Commonly Used Codes:
Business Type Code
- Retail Trade (General)- 09028
- Software Development -14001
- Legal Professionals – 16002
- Chartered Accountants -16004
- Medical Professionals -16001
- Digital Marketing Services -14005
You can find the latest and full list of business codes on the official Income Tax e-filing portal. My Finance Gyan also provides updated guides for your convenience.
How to Select the Correct Income Tax Business Code?
Choosing the correct code is crucial. Here’s how you can do it smartly:
Step-by-Step Process:
- Identify Your Primary Business Activity– Focus on what generates most of your income.
- Match it with the Latest Business Code List– Refer to the AY 2024-25/2025-26 classification.
- Use the Code That Closely Represents Your Work– Don’t randomly pick; match your business model.
- Avoid Using General or Misleading Codes– It may raise red flags.
Tips for Different Taxpayers:
- Freelancers: Use service-oriented codes like IT, content creation, or online education.
- Shop Owners: Choose from retail or wholesale codes as per your actual business.
- Professionals (Doctors, CAs, Architects): Use the “Professional Services” codes only.
- Mistake to avoid: Using last year’s codes without checking the updated list. Old codes may no longer be valid or accurate.
Consequences of Wrong Income Tax Business Code:
Incorrectly choosing your income tax business code is not just a technical error — it can have real consequences.
Key Risks:
- Notices from the Income Tax Department
- Mismatched GST vs ITR Data
- Delayed Processing or Rejections
- Risk of Scrutiny or Audit
- Need for Revised Return Filing
Selecting the correct business code enhances transparency and reduces the chances of tax-related issues.
Income Tax Business Code in Different ITR Forms:
Different ITR forms require business codes in specific sections:
ITR-3:
- For individuals and HUFs with income from business/profession.
- Code to be entered in the “Nature of Business” section under Schedule BP.
ITR-4 (Sugam):
- For presumptive income filers under Section 44ADA, 44AD, 44AE.
- Business code must be filled under the “Nature of Business/Profession” section.
Examples:
- A doctor filing ITR-4 under 44ADA will choose 16001.
- A small grocery shop using ITR-4 under 44AD may use 09028.
Step-by-Step Guide to Enter Income Tax Business Code Online:
Filing return on the Income Tax Portal? Here’s how you enter the code:
Online Portal Steps:
- Log in to https://www.incometax.gov.in
- Choose File ITR and select the relevant form (ITR-3/ITR-4)
- Go to “Income Details” → Business/Profession Section
- Select the applicable Nature of Business Code from the dropdown
- Save and proceed to the next section
Make sure your code matches your actual business activity. If you run multiple small businesses, use the one that contributes the highest turnover.
Conclusion:
The updated Income Tax Business Code is a small but significant part of your ITR. Whether you are a freelancer, trader, shopkeeper, or a service professional, using the right income tax nature of business code ensures transparency, smoother processing, and reduced chances of notices.
Always keep yourself updated with changes released by the Income Tax Department — and platforms like My Finance Gyan bring you all such updates regularly. For any legal business help, like MSME registration, Shop Act, or GST filing, you can visit Startup Portal, a reliable source for business compliance support.
FAQs About Income Tax Business Code:
No, the department has released an updated list for AY 2024–25. Using old codes may result in errors or rejection.
You can find the latest list on the Income Tax e-filing portal or reliable sources like My Finance Gyan, which keeps users updated with accurate financial info.
Yes. Professionals like doctors, lawyers, and IT consultants have specific codes.
Yes, the Income Tax Department has updated the list to better align with current business trends, digital professions, and GST classifications. Make sure to refer to the latest business code list when filing your return for AY 2024–25 and beyond.
You can refer to the updated list of business codes issued by the Income Tax Department for the relevant assessment year. Choose the code that best matches your primary source of income. Platforms like My Finance Gyan regularly publish these updates for easier access.
