ITR 3 Form

Introduction

What is the ITR 3 Form?

The ITR-3 form is an income tax return form specifically designed for resident individuals and Hindu Undivided Families (HUFs) who earn income from a proprietorship business or a profession. It is applicable to professionals engaged in fields such as accountancy, medicine, architecture, engineering, legal services, or other similar vocations.

Navigating tax compliance can be complex, and the ITR-3 form plays a crucial role for taxpayers with business or professional income. This form captures a wide range of financial details—from business profits to capital gains and other taxable sources—ensuring a comprehensive income declaration. By understanding the structure and requirements of ITR-3, taxpayers can accurately report their earnings and fulfill their tax obligations with confidence.

Who is Eligible to File ITR 3 Form Online?

The ITR-3 form is designed for individuals and Hindu Undivided Families (HUFs) whose total income during a given assessment year includes any of the following:

Income from Business or Profession: Income earned through a proprietorship business or profession, where the taxpayer is the proprietor (applies to both audited and non-audited cases).
Income from House Property: Income generated from one or more house properties.
Income from Other Sources: Earnings such as winnings from lotteries, horse racing, and other similar sources.
Foreign Income: Income generated from assets or sources outside of India.
Capital Gains: Income from the sale of assets, either short-term or long-term capital gains.

If any of these categories apply to you, you are eligible to file your ITR-3 form. Now, let’s look at how you can file this form.

How to File Returns Using ITR-3 Form

Filing ITR-3 online is mandatory for eligible taxpayers. Here’s how you can complete the filing process:

Step 1: Visit the E-Filing Portal

Start by visiting the official Income Tax Department e-filing portal.

Step 2: Log into the Portal

Log in using your PAN as the user ID, your password, and the Captcha code. If you’re a new user, you’ll need to register before continuing.

Step 3: Navigate to the ‘e-File’ Menu

Once logged in, go to the ‘e-File’ option and select ‘Income Tax Return’ from the drop-down menu.

Step 4: Auto-populated PAN Details

Your PAN details will automatically populate. Choose the Assessment Year for which you are filing the return. Then, select ‘ITR Form Number’ and choose ‘ITR 3’.

Step 5: Select Filing Type

Choose ‘Original’ for your first-time filing. If you’re submitting a revised return, select ‘Revised Return’.

Step 6: Submission Mode

Under ‘Submission Mode’, select ‘Prepare and Submit Online’ and click ‘Continue’.

Step 7: Enter Income and Tax Details

Carefully fill in all necessary details, including your income, exemptions, deductions, investments, and any TDS, TCS, or advance tax payments made during the year.

Step 8: Save Your Progress

As you complete the form, periodically click on ‘Save the Draft’ to ensure you don’t lose your information.

Step 9: Select Verification Method

Choose a verification option from the available methods:

Electronic Verification Code (EVC)
Digital Signature Certificate (DSC)
Physical Verification: Send a signed ITR-V to the Centralised Processing Centre (CPC).

For instant e-verification, you can choose one of the following:

Digitally sign the verification section.
Authenticate through EVC.
Use your Aadhaar to get an OTP.
Verify through a pre-validated bank or Demat account.

Note: E-verification is required for taxpayers whose accounts need auditing under Section 44AB.

Step 10: Review and Submit

Click ‘Preview and Submit’ to review your information and then click ‘Submit’ to complete the process.

Offline Filing Option

Offline filing of ITR-3 is available only for:

Individuals aged 80 years or older.
Individuals with an income less than ₹5 lakh.

Additionally, these taxpayers must not request any tax refunds in order to file offline.

By following these steps, you can successfully file your ITR-3 online and ensure compliance with the tax department’s requirements

Changes Made in ITR-3 Form for AY 2023-24

The Assessment Year 2023–24 brought several notable updates to the ITR-3 form. Below is a summary of the major changes introduced:

When filing returns, taxpayers are now required to report the following details:

Cash Deposits: Any cash deposits exceeding ₹1 crore in a current account with a bank.
Foreign Travel Expenditure: Expenses on foreign travel exceeding ₹2,00,000.
Electricity Consumption: Payment of electricity bills exceeding ₹1,00,000.

In addition, if the assessee has earned short-term or long-term capital gains from the sale of land and/or buildings, the following information must be furnished:

PAN or Aadhaar details
Residential address
Percentage share of ownership

Other Key Updates:

Schedule 112A Introduced: A new schedule has been added to compute long-term capital gains from the sale of equity shares or units of a business trust, where the transaction is subject to Securities Transaction Tax (STT).
Company Directorship and Unlisted Shares: Taxpayers who are directors in a company or hold investments in unlisted equity shares must disclose the ‘Type of Company’.
Expanded Reporting Period for Tax Deductions: Detailed disclosure is now required for deductions claimed on expenditures, payments, or investments made during the extended period from 1st April 2022 to 30th June 2023.

Instructions for Filing ITR-3 Online

Instructions for Filing the ITR-3 Form Online

While the relevant sections must be properly completed, here are some important instructions to keep in mind when filing the ITR-3 Form:

If a schedule does not apply to the assessee, indicate this by writing ‘-NA-’.
If there is no amount to report in a field, mention ‘Nil’.
If a profit figure is negative, prefix the amount with a ‘-’ sign.
Round off all figures to the nearest rupee.
Round off the total income or loss payable to the nearest multiple of ₹10.
Complete Part A first, then fill out the 23 schedules in Part B, and finally verify the entire return before submission.

ITR e-Filing – Login and Required Documents

You can file your income tax return (ITR) online through platforms like ClearTax. Here’s a quick guide for filing ITR-3 online, particularly for individuals with income from business or profession, as well as those engaged in intra-day trading or Futures and Options (F&O) trading.

Before you start, keep the following documents ready:

PAN (Permanent Account Number)
Aadhaar Card
Bank account details
Form 16 (if applicable)
Investment details
Books of accounts

Restrictions on Using the ITR-3 Form for Filing an Income Tax Return

The following individuals or Hindu Undivided Families (HUFs) are not eligible to file their income tax returns using the ITR-3 form:

Individuals or HUFs earning income from assets located outside India.
Individuals or HUFs deriving income as partners in a business or profession.
(In such cases, the appropriate form to be used is ITR-2.)

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

Individuals or Hindu Undivided Families (HUFs) who earn income as partners in a partnership firm engaged in a business or profession are not eligible to file their returns using the ITR-3 Form.
In such cases, the appropriate form to be used is ITR-2.

When Should the ITR-3 Form Be Filed?

An assessee is required to file the ITR-3 Form when they have income falling under any of the following categories:
- Income from a proprietary business
- Income from a profession
- Income from residential property
Additionally, individuals receiving income in the form of interest, salary, bonus, commission, or other remuneration that is taxable under the head ‘Profits and Gains of Business or Profession’ must also file Form ITR-3

Major Changes in the ITR-3 Form for Assessment Year (AY) 2023–24

The ITR-3 Form for the Financial Year 2022–23 has undergone several important updates, as outlined below:
1. Introduction of Schedule VDA
A new schedule named VDA has been added to capture income from Virtual Digital Assets (VDAs), including cryptocurrencies.
Taxpayers must provide a quarterly breakdown of VDA-related capital gains in the Capital Gains Schedule, detailing every transaction’s purchase and sale dates.
2. Opt-Out Declaration for Previous Tax Regime
The updated form now includes additional questions to confirm whether the assessee opted out of the New Tax Regime in earlier years.
This aims to streamline the reporting of tax regime preferences.
3. Additional Disclosure for FIIs/FPIs
Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) are now required to furnish their SEBI Registration Number as part of the disclosure process, ensuring better regulatory compliance.
4. Change in Balance Sheet Reporting
Under the revised ITR-3, advances received from persons specified under Section 40A(2)(b) and others must be reported under the ‘Advances’ heading in the Source of Funds section of the balance sheet.
5. Introduction of a ‘Trading Account’ Section
A new Trading Account section has been introduced, requiring taxpayers to report turnover and income from intraday trading activities.
This ensures accurate reporting of trading-related financials

Structure of the ITR-3 Form

The ITR-3 form is divided into four main sections, each designed to capture specific details required for filing a comprehensive tax return:

Section 1: Part A
Section 2: Schedules
Section 3: Part B
Section 4: Verification

Let’s explore each section in detail:

Part A

Part A-GEN: General information including personal details and nature of the business or profession.
Part A-Manufacturing Account: Manufacturing account for the financial year.
Part A-Trading Account: Trading account details for the financial year.
Part A-P&L: Profit and Loss statement for the financial year.
Part A-BS: Balance sheet as of the financial year-end for the proprietary business.
Part A-OI: Optional information for cases not subject to audit under Section 44AB.
Part A-QD: Optional quantitative details for cases not liable for audit under Section 44AB.

Schedules

Each schedule serves a specific purpose related to different heads of income, deductions, and disclosures:

Schedule S: Income from salaries.
Schedule BP: Income from business or profession.
Schedule HP: Income from house property.
Schedule DPM: Depreciation on plant and machinery.
Schedule DOA: Depreciation on other assets.
Schedule DCG: Capital gains on sale of depreciable assets.
Schedule CG: Capital gains income.
Schedule DEP: Consolidated depreciation summary.
Schedule ESR: Deduction for expenditure on scientific research.
Schedule 112A: Capital gains details under Section 112A (for equity shares or units subject to STT).
Schedule OS: Income from other sources.
Schedule 115AD(1)(iii) Proviso: Capital gains details for non-residents under Section 112A.
Schedule CYLA: Set-off of current year losses.
Schedule BFLA: Set-off of brought forward losses.
Schedule CYLA-BFLA: Combined statement for current and brought forward losses.
Schedule CFL: Losses to be carried forward.
Schedule ICDS: Impact of Income Computation and Disclosure Standards (ICDS) on profits.
Schedule UD: Details of unabsorbed depreciation.
Schedule 10AA: Deductions under Section 10AA.
Schedule RA: Details of donations eligible for deductions.
Schedule VIA: Deductions under Chapter VI-A.
Schedule 80G: Donations eligible under Section 80G.
Schedule 80IC/80-IE: Deductions under Sections 80-IC or 80-IE.
Schedule 80IB: Deductions under Section 80IB.
Schedule 80IA: Deductions under Section 80IA.
Schedule AMT: Computation of Alternate Minimum Tax (AMT) under Section 115JC.
Schedule AMTC: AMT credit computation under Section 115JD.
Schedule SPI-SI-IF: Income of specified persons or associations included in assessee’s total income.
Schedule EI: Details of exempt income.
Schedule TPSA: Secondary adjustment of transfer pricing under Section 92CE(2A).
Schedule FSI: Foreign income and tax relief details.
Schedule PTI: Income from business trusts and investment funds (Sections 115UA and 115UB).
Schedule TR: Tax relief under Sections 90, 90A, and 91.
Schedule 5A: Apportionment of income between spouses governed by Portuguese Civil Code.
Schedule DI: Tax-saving investments made during the extended period.
Schedule FA: Foreign assets and income details.
Schedule AL: Asset and liability details for individuals with income above ₹50 lakh.
Schedule GST: Turnover or gross receipts reported under GST.

Part B

Part B-TI: Calculation of total income.
Part B-TTI: Computation of total tax liability based on the total income.

Verification

The final section involves verifying and authenticating the information provided in the form.
This step confirms the accuracy and completeness of the return before submission

Frequently Asked Questions (FAQs)

1. Where can I download the ITR-3 form?

You can download the ITR-3 form from the official Income Tax Department’s e-filing portal: https://www.incometax.gov.in

2. Can I file the ITR-3 form online?

Yes, filing ITR-3 is mandatory online. Taxpayers must submit their return electronically and verify it either through Aadhaar OTP, net banking, or by sending a signed ITR-V to the Centralized Processing Center (CPC).

3. Why is it necessary to file an income tax return?

Filing an ITR is essential to declare income earned during a financial year, claim eligible deductions, and request refunds on excess taxes paid. It is also a legal obligation for individuals exceeding prescribed income thresholds.

4. What is the last date to file ITR-3 for FY 2022–23 (AY 2023–24)?

The due date for filing ITR-3 for the financial year 2022–23 is July 31, 2023, unless extended by the government.

5. I earn income from business and have opted for presumptive taxation. Should I use ITR-3?

No, if you are opting for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE, you should file your return using ITR-4, not ITR-3.

6. Is ITR-3 applicable to all individuals with business income?

No. ITR-3 is applicable only to individuals and Hindu Undivided Families (HUFs) having income from business or profession not covered under presumptive taxation. Those under presumptive taxation must use ITR-4.

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