Comprehensive Guide to Income Tax Return Form 3: Eligibility, Structure, and Filing Procedures

Income Tax Return (ITR) Form 3 is designed for individuals and Hindu Undivided Families (HUFs) who derive income from profits and gains generated through a business or profession. This particular form is extensive, allowing assessees to report various income types.

Understanding ITR Form 3

ITR-3 is the designated income tax return form for individuals and HUFs with income from a business or profession. It covers a broad spectrum of income sources, making it a comprehensive form for taxpayers involved in such activities.

Eligibility Criteria for Filing ITR-3

ITR-3 is applicable to:

• Individuals and HUFs.
• Those operating a business under a presumptive taxation scheme.
• Professionals.
• Individuals with income from dividends or interest.
• Freelancers or consultants.
• Those earning income from Futures & Options (F&O) trading, intraday trading, or other share trading activities.
• This return may also encompass income from house property, salaries or pensions, capital gains, and other miscellaneous sources.
• Individuals receiving remuneration from a partnership firm (excluding Limited Liability Partnerships).

Who Should Not File ITR-3

ITR-3 is not suitable for:

• Any entities other than individuals and HUFs.
• Individuals and HUFs who do not have income from a business, profession, or a partnership firm.
• Conversely, taxpayers eligible to file ITR-1, ITR-2, or ITR-4 are generally not required to file ITR-3.

Important Due Dates for ITR-3 Filing

For non-audit cases, the deadline to file ITR-3 for Financial Year (FY) 2024-25 (Assessment Year (AY) 2025-26) has been extended to September 16, 2025. For cases requiring a tax audit, the due date is October 31, 2025.

Significant Updates to ITR-3 for AY 2025-26

Several key changes have been introduced in the ITR-3 form for the Assessment Year 2025-26:

Capital Gain Classification (Before/After July 23, 2024)

Taxpayers are now required to segment capital gains based on amendments in the Finance Act, 2024, distinguishing between gains accrued before and after July 23, 2024. This change aims to clarify tax calculations for capital gains.

Capital Loss on Share Buyback (After October 1, 2024)

New provisions permit claiming capital losses on share buybacks, provided the corresponding dividend income is reported under "Income from Other Sources." This rule is effective from October 1, 2024, enhancing clarity for such transactions.

Asset and Liability Reporting Threshold Increased

The disclosure limit for assets and liabilities in ITR-3 has been raised to a total income exceeding ₹1 crore. Taxpayers surpassing this threshold must provide comprehensive details of their assets and liabilities. This revision promotes greater transparency for high-income earners.

Inclusion of Section 44BBC (Cruise Business)

The ITR-3 form now incorporates presumptive taxation provisions under Section 44BBC, as per the Budget 2024, for cruise business operators. Non-resident cruise operators will find 20% of their passenger carriage receipts deemed as taxable profits. This addition standardizes reporting for cruise businesses.

Enhanced Deduction Reporting

Detailed reporting is now mandated for various deductions, including those under Section 80C and Section 10(13A) (House Rent Allowance). Taxpayers claiming these deductions must provide more comprehensive information to ensure eligibility and minimize reporting errors, thereby improving compliance accuracy.

TDS Section Code Requirement

A new requirement involves reporting the Tax Deducted at Source (TDS) section code within the Schedule-TDS of the ITR-3 form. This facilitates better tracking of TDS and simplifies reconciliation for both taxpayers and tax authorities.

How to Submit ITR-3 Form

Taxpayers can electronically file Form ITR-3 using two primary methods:

• Digital Signature: Submit the return electronically with a digital signature. An acknowledgment will be sent to the registered email address.
• Electronic Data Transmission with Verification: Transmit data electronically and then submit the signed verification form (ITR-V). This form must be sent to the Income Tax Department's Centralized Processing Centre (CPC) office in Bangalore within 30 days of e-filing. Alternatively, the ITR-V can be downloaded and verified online.

Step-by-Step Guide to e-File ITR-3 on the Income Tax Portal

Here’s how to file your ITR-3 through the official Income Tax e-Filing Portal:

1. Log In to the Portal: Access the Income Tax e-Filing Portal and sign in using your Permanent Account Number (PAN) as the User ID and your password.
2. Navigate to Income Tax Return: From the "e-File" menu, select "Income Tax Return" from the dropdown. Choose the relevant Assessment Year and opt for "Online" filing mode.
3. Initiate New Filing: Click "Start New Filing" and specify your taxpayer status (e.g., Individual, HUF).
4. Select ITR Form: Choose the appropriate ITR Form (ITR-3, if it applies to your income profile).
5. State Reason for Filing: Click "Let’s Get Started" and indicate the reason for submitting your return.
6. Choose Applicable Schedules: Select all schedules that correspond to your various sources of income.
7. General Information and Regime Selection: Begin with the "General Information" section, verify any pre-filled data, and choose your preferred tax regime (Old or New). Remember that opting out of or into the old regime may require submitting Form 10IEA.
8. Complete Relevant Schedules: Fill out all applicable schedules with your income details, then proceed to the "Verification" stage.
9. Review, Correct, and Submit: Carefully review your return for any errors and make necessary corrections. Pay any self-assessment tax due, and then submit your ITR.

Structure of the ITR-3 Form for AY 2024-25 and AY 2025-26

The ITR-3 form is structured into several parts and schedules:

Part A

• Part A-GEN: General information, including the nature of the business.
• Part A-BS: Balance Sheet of the proprietary business or profession as of March 31, 2021.
• Part A-Manufacturing Account: Manufacturing Account for the financial year 2020-21.
• Part A-Trading Account: Trading Account for the financial year 2020-21.
• Part A-P&L: Profit and Loss account for the Financial Year 2020-21.
• Part A-OI: Other Information (optional if not liable for audit under Section 44AB).
• Part A-QD: Quantitative Details (optional if not liable for audit under Section 44AB).

Schedules

• Schedule-S: Calculation of income under the "Salaries" head.
• Schedule-HP: Calculation of income under the "Income from House Property" head.
• Schedule BP: Calculation of income from business or profession.
• Schedule-DPM: Calculation of depreciation on plant and machinery as per the Income-tax Act.
• Schedule DOA: Calculation of depreciation on other assets as per the Income-tax Act.
• Schedule DEP: Summary of depreciation across all assets as per the Income-tax Act.
• Schedule DCG: Calculation of deemed capital gains from the sale of depreciable assets.
• Schedule ESR: Deduction under section 35 (expenditure on scientific research).
• Schedule-CG: Calculation of income under the "Capital Gains" head.
• Schedule 112A: Specific details for Capital Gains where section 112A applies.
• Schedule 116AD(1)(b)(iii)Proviso: For Non-Residents, details of Capital Gains where section 112A applies.
• Schedule-OS: Calculation of income under the "Income from Other Sources" head.
• Schedule-CYLA-BFLA: Statement of income after adjusting for current year's losses and unabsorbed losses carried forward from previous years.
• Schedule-CYLA: Statement of income after setting off current year’s losses.
• Schedule BFLA: Statement of income after setting off unabsorbed losses brought forward from earlier years.
• Schedule CFL: Statement of losses to be carried forward to future years.
• Schedule-UD: Statement of unabsorbed depreciation.
• Schedule ICDS: Impact of Income Computation Disclosure Standards on profit.
• Schedule-10AA: Calculation of deduction under section 10AA.
• Schedule 80G: Statement of donations eligible for deduction under section 80G.
• Schedule RA: Statement of donations to research associations, etc., eligible for deduction under section 35(1)(ii), 35(1)(iia), 35(1)(iii), or 35(2AA).
• Schedule-80IA: Calculation of deduction under section 80IA.
• Schedule-80IB: Calculation of deduction under section 80IB.
• Schedule-80IC/80-IE: Calculation of deduction under section 80IC/80-IE.
• Schedule VI-A: Statement of deductions from total income under Chapter VIA.
• Schedule AMT: Calculation of Alternate Minimum Tax Payable under Section 116JC.
• Schedule AMTC: Calculation of tax credit under section 116JD.
• Schedule SPI: Statement of income from spouse, minor child, son's wife, or any other person/association of persons to be included in the assessee's income under Schedules-HP, BP, CG, and OS.
• Schedule SI: Statement of income chargeable to tax at special rates.
• Schedule-IF: Information regarding partnership firms where the assessee is a partner.
• Schedule EI: Statement of income not included in total income (exempt incomes).
• Schedule PTI: Pass-through income details from a business trust or investment fund as per sections 116UA, 116UB.
• Schedule TPSA: Secondary adjustment to transfer price as per section 92CE(2A).
• Schedule FSI: Details of income from outside India and applicable tax relief.
• Schedule TR: Statement of tax relief claimed under section 90, section 90A, or section 91.
• Schedule FA: Statement of Foreign Assets and income from any source outside India.
• Schedule 5A: Information on income apportionment between spouses governed by Portuguese Civil Code.
• Schedule AL: Assets and Liabilities at the end of the year (applicable if total income exceeds ₹50 lakhs).
• Schedule tax deferred on ESOP: Information on tax deferred on Employee Stock Option Plans (ESOPs) received from eligible start-ups as per Section 80-IAC.
• Schedule GST: Information regarding turnover or gross receipt reported for Goods and Services Tax (GST).

Final Parts

• Part B-TI: Calculation of Total Income.
• Part B-TTI: Calculation of tax liability on total income.
• Verification: Final declaration and verification.

Business Codes for ITR Forms

This table provides various business and professional codes to be used in ITR forms:

Significant Updates to ITR-3 for AY 2023-24 and AY 2024-25

The following revisions were integrated into the ITR-3 form for FY 2022-23 and remain applicable for FY 2023-24:

• Virtual Digital Asset (VDA) Reporting: A new Schedule VDA has been introduced for separate reporting of income from cryptocurrencies or other VDAs. If VDA income is classified as capital gains, a quarterly breakdown is required under the Capital Gains Schedule. Each VDA transaction must be reported with sale and purchase dates.
• New Tax Regime Opt-Out Inquiry: The updated ITR-3 includes questions to ascertain if the taxpayer opted out of the New Tax Regime in prior years.
• FII/FPI Disclosure: Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) are now required to provide their SEBI registration number for additional disclosure.
• Balance Sheet Reporting Update: Minor adjustments in balance sheet reporting require advances received from specific individuals under Section 40A(2)(b) of the Income Tax Act, and others, to be categorized under the ‘Advances’ heading within the Source of Funds.
• Intraday Trading Reporting: Turnover and income generated from intraday trading must now be reported under the newly created ‘Trading Account’ section.

Downloading the ITR-3 Utility

You can download the official ITR-3 utility tool directly from the Income Tax Portal.