A Complete Guide for Filing ITR 3 Form

Filing an income tax return can be a complex process. Although taxpayers can now file their tax returns online, certain common errors still remain that most people make. Any mistake while filing the form can lead to issues later. Hence, your income, tax deductions, and personal details like PAN card numbers must be correctly filled in and submitted to the Income Tax Department in time.

Another important aspect to remember is selecting the right ITR form because there is a unique form for every category of taxpayers. One of these is the ITR 3 form, which is filled out by individuals and HUFs with income from business, capital gains, or other sources.

But, the question is, what is ITR 3 form, and how to file ITR 3 if you fall under any one of the above categories? Keep reading to discover!

What is the ITR 3 Form?

Let us start with the basics to properly understand the ITR 3 meaning. Income Tax Return (ITR) 3 is a specific form mandated by the Indian Income Tax Department for certain taxpayers to file their annual income tax returns. It is specifically designed for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession. This means that if you are self-employed, running a small business, freelancing, or working as a professional (like a doctor, lawyer, or architect), the ITR 3 form is likely for you. The form is a way for business professionals to declare their income, deductions, and tax liabilities to the Indian government.

Eligibility Criteria for Filing Income Tax Return Form 3?

Now that you know what ITR 3 means, read these eligibility criteria to understand who can file this form:

• The taxpayer is the director of a company or business.
• The taxpayer’s residential status is either resident or non-resident of India.
• The taxpayer is drawing an income from a pension.
• The taxpayer is earning an income from house property.
• The taxpayer has investments in unlisted equity shares.
• The taxpayer’s income is taxable under ‘profits and gains of business or profession.’ This includes salary, interest, commission, bonus, or remuneration.

Taxpayers can also use the ITR Form 3 if their total income includes the following:

• Income from single-house property or multiple-house properties. Income from a lottery, betting on races, and other forms of gambling that are legal as per Indian law.
• Income from short-term or long-term capital gains.
• Income earned from a business or profession that practices under a proprietorship firm owned by the individual or a HUF.
• Income earned from foreign assets.

Simply put, if you earn through a business or a professional practice and are not eligible for ITR 1, ITR 2, or ITR 4, then ITR 3 form might just be your match!

Who is Not Eligible to File the ITR 3 Form?

Not everyone qualifies for the ITR 3, so quickly take a look at who is not eligible for this form:

• Salaries individuals who have no additional business income.
• Individuals with only capital gains or rental income.
• Those who fall under the ITR 1, 2, or 4 categories.
• If your main income source is only salary, pension, or investments, this form is not right for you.

If you are still wondering about what form to opt for your needs, just think about your income sources. If they do not involve business, partnerships, or self-employment, then ITR 3 is for you.

What Changes Were Made to the ITR 3 Form for 2024-25?

For the financial year 2024-25, the ITR 3 form has a few new changes to keep up with evolving tax rules, especially for those dealing in digital assets, foreign investments, and intraday trading. Here is a breakdown of what is new:

Detailed Reporting for Crypto and Other Virtual Digital Assets (VDAs)

There is now a dedicated section called Schedule VDAs in the ITR 3 form. This is specifically for anyone earning income from crypto or other digital assets. If you are treating VDA income as capital gains, you will need to provide a quarterly breakdown of it in the Capital Gains section. Plus, every crypto transaction, including buying and selling dates, must be reported.

Disclosure for Foreign Institutional Investors (FII/FPI)

If you are an FII or Foreign Portfolio Investor, you will need to include your SEBI registration number in the ITR 3. This added disclosure improves transparency around foreign investments in India.

Updates to Balance Sheet Reporting

There is a minor tweak in the balance sheet section. Now, advances received from certain specified individuals, covered under section 40A(2)(b) of the Income Tax Act, need to be reported under the Advances in the Source of Funds category. This clarifies exactly where certain advances should be listed.

New ‘Trading Account’ Section for Intraday Trading

For those involved in intraday trading, the ITR 3 form now includes a Trading Account section. This section requires you to report both turnover and income generated from intraday trading activities.

These updates help make income reporting more accurate, especially for those with complex assets and investments. If you fall under any of these categories, make sure to keep a record of each transaction to simplify your ITR 3 filing.

How to File an Income Tax Return Using an ITR 3 Form?

ITR form 3 can be filed electronically on the Income-tax Department’s e-filing portal. Once filed, you have four options for verification:

• Digital Signature: Sign the verification part electronically using a digital signature certificate.
• Electronic Verification Code (EVC): Receive a unique EVC code through your registered mobile phone or email and enter it on the portal.
• Aadhaar OTP: Use a one-time password sent to your Aadhaar-linked mobile number.
• Paper Form ITR-V: Download, print, sign, and send the Form ITR-V to the Centralized Processing Centre in Bengaluru. Make sure it reaches them within the specified timeframe, which will be indicated upon uploading your return data. You will receive email confirmation of receipt once it arrives.

However, if your accounts require an audit under Section 44AB, electronic verification through a digital signature is mandatory.

Additionally, if you are required to submit an audit report under specific sections (such as 10AA, 44AB, 80-IA, etc.) then, you must file it electronically one month before the due date of your income tax return.

Filing and verifying your return is crucial to avoid penalties and legal issues. Choose the option that best suits your needs, but ensure you meet all the requirements and deadlines.

What are the Restrictions to Using an ITR Form 3 for Filing an ITR?

While ITR 3 is a widely used form for filing income tax returns, there are certain restrictions on who can and cannot use it. Here is a breakdown of the limitations:

• Individuals or HUFs with income exceeding ₹50 lakhs from business or profession (excluding income from agriculture) cannot use ITR 3. They are required to file ITR 4 instead.
• Individuals or HUFs with income from foreign sources (excluding income from agriculture) cannot use ITR 3. They are required to file ITR 2 or ITR 6, depending on their specific income sources.
• Individuals or HUFs with income from speculative businesses or professions (including income from horse racing) cannot use ITR 3. They are required to file ITR 4.
• Individuals or HUFs having agricultural income as their primary source of income cannot use ITR 3. They are required to file ITR 1 or ITR 4, depending on their total income.
• Individuals or HUFs claiming deductions under Chapter VI-A (except section 80JJAA) cannot use ITR 3. They are required to file ITR 2 or ITR 4.
• Individuals or HUFs receiving income from being a partner in a firm that is engaged in a trade or profession cannot use form 3. In this situation, they may submit ITR 2.

What is the Structure of the ITR 3 Form?

ITR 3 is divided into parts, schedules, and verification. Here are the details of each:

Parts

Part A: General information and detailed financial data specific to the business or profession, including:

• A-GEN: General information and nature of business.
• A-BS: Balance sheet as of March 31st.
• A-Manufacturing Account: Manufacturing account details for the financial year.
• A-Trading Account: Trading account for the financial year.
• A-P&L: Profit and loss statement for the financial year.
• A-OI: Other information (optional).
• A-QD: Quantitative details (optional).

Part B: Computation of total income and tax liability. This includes:

• B-TI: Computation of total income.
• B-TTI: Computation of tax liability on total income.

Part C: Verification and declaration of the return.

Schedules

ITR 3 includes various schedules for specific income sources and deductions:

• Schedule-S: Salary income.
• Schedule-HP: House property income.
• Schedule-BP: Business or professional income.
• Schedule-DPM/DOA/DEP: Depreciation on assets.
• Schedule-DCG: Deemed capital gains.
• Schedule ESR: Scientific research expenditure deduction.
• Schedule-CG/112A/115AD(1)(iii) Provision: Capital gains.
• Schedule-OS: Other sources of income.
• Schedule-CYLA/CYLA-BFLA/BFLA/CFL: Loss carry forward and set-off.
• Schedule-UD: Unabsorbed depreciation.
• Schedule ICDS: Effect of income computation disclosure standards.
• Schedule-10AA/80G/RA/80IA/80IB/80IC/80-IE: Deductions under various sections.
• Schedule VIA: Deductions under Chapter VIA.
• Schedule SPI-SI-IF: Income of specified persons, income at special rates, and partnership firm information.
• Schedule AMT/AMTC: Alternate minimum tax and credit.
• Schedule SPI/SI/IF: Income of spouse/minor child/partner, income at special rates, and partnership firm information.
• Schedule EI: Exempt income.
• Schedule PTI: Pass-through income details.
• Schedule TPSA: Secondary adjustment to transfer price.
• Schedule FSI: Foreign income and tax relief.
• Schedule TR: Tax relief claimed.
• Schedule FA: Foreign assets and income from outside India.
• Schedule 5A: Apportionment of income between spouses (Portuguese Civil Code).
• Schedule AL: Assets and liabilities exceeding ₹50 lakhs.
• Schedule DI: Tax-saving investments/deposits/payments from April 1st to June 30th, 2020.
• Schedule GST: Information regarding GST turnover/gross receipt.

Verification

The final part involves verifying the accuracy of the information provided and declaring the genuineness of the return.

Due Dates to File ITR 3 Form

For most taxpayers, the deadline to file ITR 3 for non-audit cases is July 31 each year. However, if you need to get your account audited, the due date is extended to 31 October. Remember, filing your ITR on time means you avoid penalties and interest fees.

Wrapping It Up

Filing ITR in income tax returns can be complex. Choosing the right ITR form and ensuring accurate information is crucial if you wish to avoid complications. For individuals and HUFs earning from business, capital gains, or other sources of income, the ITR 3 form offers a comprehensive solution. Understanding its eligibility criteria, structure, and filing process can simplify your tax filing experience. Remember to stay updated on any changes made to the ITR forms to ensure compliance and avoid unnecessary delays or penalties.

FAQs for ITR 3 Form