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A Complete Guide for Filing ITR 3 Form

Businesses, professionals, and individuals with capital gains or other income sources should use the ITR 3 form for income tax filing. Know the eligibility criteria, structure, and filing process to avoid complications.

  • 13,541 Views | Updated on: Mar 20, 2024

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.

Key Takeaways

  • Individuals and HUFs with income from business, capital gains, and other sources can use ITR-3.
  • There are certain individuals like agricultural income earners, partnership firm partners, and those with income exceeding ₹50 lakhs are not eligible.
  • The form can be filled electronically on the e-filing portal with options for digital signature, EVC, Aadhaar OTP, or paper Form ITR-V.
  • For AY 2023-24, a separate reporting for crypto & VDA and a new ‘Trading Account’ section have been added.

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

What is the ITR 3 Form?

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. This form is primarily used by individuals and Hindu Undivided Families (HUFs) who have income from profits and gains from business or profession, capital gains, and other sources, such as rent, interest, and dividends.

Eligibility Criteria for Filing Income Tax Return Form 3?

Here are the eligibility criteria for using the ITR Form 3 to file an income tax return:

  • 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.

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’s 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 partnership firm that is engaged in a trade or profession. 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. This includes:

  • A-GEN: General information and nature of business.
  • A-BS: Balance sheet as of March 31st.
  • A-Manufacturing Account: Manufacturing account 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.

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, suppose you are required to submit an audit report under specific sections (such as 10AA, 44AB, 80-IA, etc.). In that case, 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 Changes Were Made to the ITR 3 Form for 2022-23?

Several changes were made to the ITR 3 form for the assessment year 2022-23 (AY 2023-24). Here are some of the key ones:

  • Separate reporting: A new schedule for crypto and virtual digital assets (VDA) has been introduced to report income from cryptocurrencies and other VDAs specifically.
  • If you treat VDA income as capital gains, a quarterly breakdown is required under the Capital Gains Schedule.
  • Every VDA transaction must be reported with its sale and purchase dates.
  • Additional questions have been added to determine if you opted out of the New Tax Regime in previous years.
  • FIIs/FPIs must now provide their SEBI registration number for increased transparency.
  • Advances received from specific individuals {as per Sec 40A(2)(b) of the Income Tax Act} and others must be reported under the ‘Advances’ heading in the Source of Funds section.
  • A new section named ‘Trading Account’ has been introduced to report turnover and income from intraday trading activities.
  • Taxpayers should provide details of ‘capital gains’ and ‘dividends’ in the case of a business trust or investment fund.

Wrapping it Up

Filing income tax returns can be complex. Choosing the right ITR form and ensuring accurate information is crucial 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.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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