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, there still remain certain common errors 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 number, etc., must be correctly filled in and submitted in time to the Income Tax Department.

Key takeaways

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.

Another important aspect to keep in mind is selecting the right ITR form, there is a unique ITR form for every category of taxpayers. One of these is the ITR 3 form. This article discusses the ITR 3 form, taxpayers who can use it, and how it should be filled.

What is the ITR 3 Form?

1 Individual taxpayers and Hindu Undivided Families (HUFs) can use an ITR 3 form to file their income tax return if they have earned their annual income from profits and gains from a business or profession. In broad terms, this includes the following taxpayers:

Individuals who have earned their income from a business or profession.

Individuals who have earned their income from salary or pension, a property such as a house, and other sources.

Who can use the ITR form 3 for filing their income tax return?

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

1.The taxpayer is the director of a company or business.

2.The taxpayer’s residential status is either resident or non-resident of India.

3.The taxpayer is drawing an income from a pension.

4.The taxpayer is earning an income from house property.

5. The taxpayer has investments in unlisted equity shares.

6.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:

1. 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.

2. Income from short-term or long-term capital gains.

3. 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 income tax return?

1. Income earned from foreign assets.

2. The following taxpayers are not considered eligible to file an income tax return with an ITR 3 form:

An individual or HUF earning their income from a partnership or as partners from a business or profession. The right income tax return form, in this case, is the ITR 2 form.

What is the structure of the ITR 3 form?

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

1.. Part A

Part A-GEN: General information and Nature of Business

Part A-BS: Balance Sheet as of March 31, 2020, of the Proprietary Business or Profession

Part A- Manufacturing Account: Manufacturing Account for the financial year 2021-22

Part A- Trading Account: Trading Account for the financial year 2019-20

Part A-P&L: Profit and Loss for the financial year 2019-20

Part A-OI: Other Information (this is optional if not liable for audit under Section 44AB)

Part A-QD: Quantitative Details (this is optional if not liable for audit under Section 44AB)

2. Schedules

Schedule-S: Computation of income under the head Salaries.

Schedule-HP: Computation of income under the head Income from House Property

Schedule BP: Computation of income from business or profession

Schedule-DPM: Computation of depreciation on plant and machinery under the Income Tax Act of 1961

Schedule DOA: Computation of depreciation on other assets under the Income Tax Act of 1961

Schedule DEP: Summary of depreciation on all the assets under the Income Tax Act of 1961

Schedule DCG: Computation of deemed capital gains on the sale of depreciable assets

Schedule ESR: Deduction under Section 35 (expenditure on scientific research)

Schedule-CG: Computation of income under the head Capital gains.

Schedule 112A: Details of Capital Gains where Section 112A is applicable

Schedule 115AD(1)(iii)Provision: For non-residents details of Capital Gains where Section 112A is applicable

Schedule-OS: Computation of income under the head Income From Other Sources

Schedule-CYLA-BFLA: Statement of income after set off of current year’s losses and statement of income after set off of unabsorbed loss brought forward from earlier years

Schedule-CYLA: Statement of income after set off of current year’s losses

Schedule BFLA: Statement of income after set off of unabsorbed loss 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: Effect of Income Computation Disclosure Standards on Profit

Schedule- 10AA: Computation of deduction under Section 10AA

Schedule 80G: Statement of donations entitled for deduction under Section 80G

Schedule RA: Statement of donations to research associations etc., entitled for deduction under Section 35(1)(ii) or 35(1)(iia) or 35(1)(iii) or 35(2AA)

Schedule- 80IA: Computation of deduction under Section 80IA

Schedule- 80IB: Computation of deduction under Section 80IB

Schedule- 80IC/ 80-IE: Computation of deduction under Section 80IC/ 80-IE

Schedule VIA: Statement of deductions (from total income) under Chapter VIA

Schedule SPI-SI-IF: Income of specified persons (spouse, minors etc.) includible in the income of the assessee, income chargeable at special rates, info partnership firms in which assessee is a partner

Schedule AMT: Computation of Alternate Minimum Tax Payable under Section 115JC

Schedule AMTC: Computation of tax credit under Section 115JD

Schedule SPI: Statement of income arising to spouse/ minor child/ son’s wife or any other person or association of persons to be included in the income of the assessee in Schedules-HP, BP, CG and OS

Schedule SI: Statement of income which is chargeable to tax at special rates

Schedule-IF: Information regarding partnership firms in which the assessee is a partner

Schedule EI: Statement of income not included in total income (exempt incomes)

Schedule PTI: Pass through income details from business trust or investment fund as per Section 115UA, 115UB

Schedule TPSA: Secondary adjustment to transfer price as per Section 92CE(2A)

Schedule FSI: Details of income from outside India and tax relief

Schedule TR: Statement of tax relief claimed under Section 90 or Section 90A, or Section 91

Schedule FA: Statement of Foreign Assets and income from any source outside India

Schedule 5A: Information regarding apportionment of income between spouses governed by the Portuguese Civil Code

Schedule AL: Asset and Liability at the end of the year (applicable where the total income exceeds ₹50 lakhs)

Schedule DI: Schedule of tax-saving investments or deposits or payments to claim deduction or exemption in the extended period from 1 April 2020 until 30 June 2020

Schedule GST: Information regarding turnover/ gross receipt reported for GST

3. Part B

Part B-TI: Computation of Total Income. Part B-TTI: Computation of tax liability on total income.

4. Verification

How to file an income tax return using an ITR 3 form?

Taxpayers can use the same order to fill out the ITR 3 form as mentioned above. This is:

1.Start with Part A and enter the general information

2.Proceed to the Schedules

3.Fill Part B TI and Part B TTI

4.Complete the verification

Taxpayers can use ITR 3 form to file their income tax return in both methods – online and offline.

If you choose the online method, you can submit the return online with a digital signature. The acknowledgement of receipt will then be sent to your registered email address.

The offline method is available to taxpayers aged 80 or more. Moreover, the total income should be lower than ₹5 lakhs. You can submit the ITR 3 form on paper by downloading it from the income tax website and mailing it to the CPC office in the Income Tax Department, Bangalore.

How to file ITR 3?

1. The following three procedures are available for filling out the ITR-3 Income Tax Return Form:

2.By using a digital signature while submitting a return electronically. (Assessors who require a tax audit must employ this technique.)

3.By electronically transmitting the data in ITR-3 form with an electronic verification number.

4 By sending the information in the ITR-3 form electronically and then mailing the return verification in the ITR-V form to the income tax office. (Taxpayers who use this approach to file ITR-3 forms must complete the acknowledgement in ITR-V.)

What changes were made to the ITR 3 form for 2021-22?

Taxpayers who are the director of a company or hold unlisted equity shares need to disclose the ‘type of company’.

Taxpayers must provide the buyer’s name, Pan card, and Aadhaar card if the income has been earned from short-term or long-term capital gains from the sale of land or a building.

Taxpayers should provide details of ‘any other income’ under ‘income from other sources’.

Taxpayers should provide deductions against ‘income from other sources’.

Taxpayers should provide details of ‘capital gains’ and ‘dividends’ in the case of a business trust or investment fund.

Who is Not Eligible to File the ITR-3 Form?

A person or HUF is ineligible to submit an ITR-3 if they receive 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.

When Should ITR 3 be Filed?

When the assessee receives income that fits into one of the following categories, an ITR-3 form is filed.

1. Earnings from a private business

2. Income from working in a profession

3. Income from a residential property

A person who receives income in the form of interest, a salary, a bonus, a commission, or other compensation subject to tax under the category of “profits and gains of business or profession” must additionally complete Form ITR-3.

Conclusion

Make sure to use the right form for filing an income tax return to avoid hassles later. Moreover, when it comes to saving money, tax savings strategies can help reduce taxes. Kotak Life offers a tax and savings guide that can help individuals build long-term savings and lower taxes in different ways.