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ITR

ITR 3 Form: How to File Income Tax Returns With Form 3?

ITR 3 Online is a form used by residents and Hindu Undivided Families (HUFs). Know what is IT Return 3 in income tax. What is the due date, structure, and how to file it?

What is ITR 3 Form?

ITR 3 form is a tax form designed for resident individuals and Hindu Undivided Families (HUFs). It is specifically meant for taxpayers who earn income from a proprietorship business or a profession. If you derive income from activities such as accountancy, architecture, medical, engineering, or similar professions, you can use the ITR-3 form to file your income tax returns.

Unlocking the intricacies of tax compliance, the ITR-3 form takes center stage. In this segment, we demystify what the ITR-3 form entails. Specifically designed for individuals and Hindu Undivided Families (HUFs) with income from business or profession, understanding the nuances of the ITR-3 form is paramount for accurate filing. From detailing financial gains to specifying losses, the ITR-3 form caters to a diverse spectrum of income sources. Join us on this informative journey, delving into the specifics of the ITR-3 form, ensuring you are well-equipped to navigate the complexities of tax filing and meet regulatory requirements seamlessly.

Who is Eligible for ITR 3 Form Online?

The ITR-3 form is applicable to individuals or Hindu Undivided Families (HUFs) whose total income for a specific assessment year includes the following:

  • Income derived from a profession or business conducted through a proprietorship firm, where the taxpayer is the proprietor (both audit and non-audit cases).
  • Income earned from one or multiple house properties.
  • Earnings obtained from winning lotteries, horse racing, and other activities classified as ‘Income from Other Sources.’
  • Income generated from assets located outside India.
  • Income generated from short-term or long-term capital gains.
  • Now that you are aware of the eligibility criteria for filing ITR-3, let’s explore the process of filing this form.

How Can You File Returns With an ITR 3 Form?

Filing ITR-3 online is mandatory. You can file your ITR 3 form online by following these step-by-step instructions:

  • Step 1: Begin the online filing process by visiting the official e-filing web portal of the Income Tax Department.
  • Step 2: Log in to the portal using your user ID (PAN), password, and a Captcha code. If you are a new user, you need to register an account before proceeding.
  • Step 3: Navigate to the menu and select the ‘e-File’ option, then choose ‘Income Tax Return’ from the drop-down menu.
  • Step 4: Your PAN details will be auto-populated on the page. Select the appropriate ‘Assessment Year’ for which you are filing the ITR. Then, choose ‘ITR Form Number’ and select ‘ITR 3‘.
  • Step 5: Choose the ‘Filing Type’ as ‘Original.’ If you are filing a revised return for a previously filed original return, select ‘Revised Return.’
  • Step 6: Locate the ‘Submission Mode’ option and select ‘Prepare and Submit Online.’ Click on ‘Continue.’
  • Step 7: Provide accurate details of your income, exemptions, deductions, and investments. Enter the information regarding tax payments made through TDS, TCS, and/or advance tax.
  • Step 8: Carefully and accurately fill in all the data. Periodically click on ‘Save the Draft’ to avoid losing any information.
  • Step 9: Choose your preferred verification option from the available options:
    1. Electronic Verification Code (EVC)
    2. Digital Signature Certificate (DSC)
    3. Physical verification by sending a signed ITR-V to the Centralised Processing Center (CPC)

Follow the instructions provided for your chosen verification method to complete the filing process.

    • Instant e-verification
    • E-verification within 120 days of filing ITR-3
    • Verification by sending a duly signed ITR-V to CPC (Centralised Processing Centre) via post within 120 days of filing a return
  • Step 10: Choose ‘Preview and Submit,’ and then click on ‘Submit.’
    • Please note that electronic verification is mandatory for accounts requiring auditing under Section 44AB.

If you are required to submit an audit report under specific sections (115JB, 115JC, 80-IA, 80-IB, 80-IC, 80-ID, 50B, 44AB, 44DA, or 10AA), you must file the report electronically before filing the ITR.

When you select the option ‘I would like to e-verify,’ you can choose instant e-verification using one of the following methods:

  • Digitally signing the verification part
  • Authenticating through an electronic verification code (EVC)
  • Using your Aadhaar details to enter an OTP
  • Authenticating through a prevalidated bank or Demat account

This is the detailed procedure for filing ITR 3 form online.

Offline filing of ITR 3 form is only available for specific taxpayers, including individuals aged 80 years or older and individuals with an income of less than ₹5 lakhs.

Additionally, these taxpayers should not have any tax refund requests if they wish to file this form offline.

What are the Changes Made in ITR 3 form AY 2023-24?

The assessment year 2023-24 introduced several significant changes in ITR-3. Here is a list of the major revisions in this form:

When filing returns, the assessee must disclose the following information:

  • Amount of cash deposits exceeding ₹1 crore in the current account with any bank
  • Expenditure on foreign travel surpassing ₹2,00,000
  • Electricity charges exceeding ₹1,00,000
  • In the case of earning short or long-term capital gains from the sale of a building and/or land, the taxpayer must provide specific details of the sale. This includes PAN or Aadhaar information, residential address, and percentage share of ownership.
  • Introduction of a separate schedule, 112A, which calculates long-term capital gains on the sale of units of a business liable to Securities Transaction Tax (STT) or equity shares.
  • Disclosure of the ‘Type of Company’ if the taxpayer holds the position of a director in a company or has investments in unlisted equity.
  • Detailed information on tax deduction claims for expenditures, payments, or investments made between 1st April 2022 to 30th June 2023.
  • And with that, we have come to the end of this article. We hope this guide provides you with a comprehensive understanding of ITR-3, enabling you to file your returns smoothly.

Instructions to be Followed While Filing ITR 3 Online Form

The aforementioned sections must be addressed in the Form. However, here is a list of important instructions to be followed while filing the ITR 3 Form:

  • If the Schedule is not applicable to the assessee, simply put ‘-NA-‘.
  • If there is no figure to denote, mention ‘Nil’.
  • If there is a negative balance written against a profit column, add the ‘-‘ sign before the figure.
  • Round off the figures to the nearest one rupee.
  • Round off the total income or payable loss to the nearest multiple of ₹ 10.
  • Fill out the Section in Part A first, followed by the 23 schedules in Part B. Finally, verify the document.

ITR e-Filing – Login & Required Documents

You have the option to file your income tax return (ITR) using the ClearTax platform. Here is a comprehensive guide on filing ITR 3 Online specifically for individuals with income from business or profession, as well as those involved in intra-day trading or Futures and Options (F&O) trading. To streamline the process, make sure you have the following documents ready:

  • PAN (Permanent Account Number)
  • Aadhaar card
  • Bank account details
  • Form 16 (if applicable)
  • Details of investments
  • Books of accounts

What are the Restrictions to Using an ITR 3 Online Form for Filing an Income Tax Return?

Earnings derived from assets located outside the country.

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

Individuals or HUFs who earn their income from a partnership or as partners in a business or profession. In such cases, the appropriate income tax return form to be used is the ITR-2 form.

Who is Not Eligible to File the ITR 3 Form?

If an individual or Hindu Undivided Family (HUF) receives income as a partner in a partnership firm involved in a trade or profession, they are not eligible to file their income tax return using the ITR 3 Online form. In such cases, they should use the ITR-2 form for filing their return.

When Should ITR 3 be Filed?

When an assessee earns income falling under any of the following categories, they are required to file an ITR 3 Online form:

  • Income derived from a proprietary business
  • Income earned from a profession
  • Income generated from a residential property

In addition, individuals who receive income in the form of interest, salary, bonus, commission, or any other compensation subject to tax under the category of ‘profits and gains of business or profession’ need to complete Form ITR-3.

Significant Modifications in ITR 3 Form for (Assessment Year) AY 2023-24

The ITR 3 form for the financial year 2022-23 has undergone several notable changes, which are as follows:

1. Addition of Schedule VDA

A new schedule called VDA has been included in the form. It is designed to facilitate the separate reporting of income generated from cryptocurrency or other Virtual Digital Assets (VDAs). If you classify VDA income as capital gains, you will be required to provide a quarterly breakdown in the Capital Gains Schedule. The new ITR-3 mandates the reporting of every VDA transaction, including the dates of sale and purchase.

2. Inclusion of Previous Tax Regime Opt-Out

The new ITR-3 form contains additional questions to determine whether you had chosen to opt out of the New Tax Regime in previous years. These inquiries aim to gather relevant information regarding your previous tax regime selection.

3. Additional Disclosure Requirement for Foreign Institutional Investors (FII/FPI)

Foreign institutional investors, namely FII/FPI, must furnish their SEBI registration number as an additional disclosure measure. This requirement ensures enhanced transparency and compliance with regulations.

4. Change in Balance Sheet Reporting

There has been a minor alteration in balance sheet reporting as per the revised ITR-3 form. Advances received from individuals specified under Section 40A(2)(b) of the Income Tax Act and others should now be reported under the ‘Advances’ category in the Source of Funds section.

5. Introduction of ‘Trading Account’ Section

The newly introduced ‘Trading Account’ section necessitates the reporting of turnover and income derived from intraday trading. This addition ensures that relevant details regarding trading activities are captured accurately.

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What is the Structure of an ITR 3 Form?

ITR 3 form is categorised into the following sections to provide a comprehensive understanding of its purpose:

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

Now, let’s delve into each of these sections to gain a clearer understanding of the meaning and content of ITR-3.

Part A

  • Part A-GEN: Contains general information and describes the nature of a business.
  • Part A- Manufacturing account: Presents the manufacturing account for a specific financial year.
  • Part A- Trading account: Provides the trading account for a given financial year.
  • Part A-P&L: Reveals the profits and losses for a particular financial year.
  • Part A-BS: Presents the balance sheet as of the year-end for the proprietary business.
  • Part A-OI: Includes optional additional information for cases not liable for audit under section 44AB.
  • Part A-QD: Contains optional quantitative details for cases not liable for audit under section 44AB.

Schedules

  • Schedule S: Calculates income under the ‘Salaries’ category.
  • Schedule BP: Computes income from a profession or business.
  • Schedule HP: Calculates income from house property.
  • Schedule DPM: Determines depreciation on plant and machinery.
  • Schedule DOA: Evaluates depreciation on other assets.
  • Schedule DCG: Calculates capital gains on the sale of depreciable assets.
  • Schedule CG: Computes income under the ‘Capital Gains’ category.
  • Schedule DEP: Summarises depreciation on all assets.
  • Schedule ESR: Includes deduction for expenditure on scientific research.
  • Schedule 112A: Provides details of capital gains applicable under Section 112A.
  • Schedule OS: Computes income under the ‘Income from Other Sources’ category.
  • Schedule 115AD(1)(iii) Provision: Requires details of capital gains applicable to non-residents under Section 112A.
  • Schedule CYLA: Presents income statement after setting off losses in the current financial year.
  • Schedule BFLA: Shows income statement after setting off unabsorbed losses brought forward from preceding financial years.
  • Schedule CYLA-BFLA: Presents income statement after setting off current year’s losses and unabsorbed losses from earlier financial years.
  • Schedule CFL: Provides a statement of losses carried forward to subsequent financial years.
  • Schedule ICDS: Reveals the effect of income computation disclosure standards (ICDS) on profits.
  • Schedule UD: Indicates unabsorbed depreciation.
  • Schedule 10AA: Calculates deductions under Section 10AA.
  • Schedule RA: Includes details of donations eligible for deductions under various sections.
  • Schedule VIA: Lists deductions under Chapter VI-A.
  • Schedule 80G: Contains details of donations eligible for deductions under Section 80G.
  • Schedule 80IC/ 80-IE: Calculates deductions under Section 80-IC or 80-IE.
  • Schedule 80IB: Computes deductions under Section 80IB.
  • Schedule 80IA: Determines deductions under Section 80IA.
  • Schedule AMT: Calculates alternate minimum tax payable under Section 115JC.
  • Schedule AMTC: Computes tax credit under Section 115JD.
  • Schedule SPI-SI-IF: Specifies persons or associations of persons included in the income of an assessee.
  • Schedule EI: Presents a statement of income not included in the total income.
  • Schedule TPSA: Refers to the secondary adjustment of taxes under Section 92CE(2A).
  • Schedule FSI: Contains details of income earned outside India and applicable tax relaxations.
  • Schedule PTI: Indicates income received from business trusts or investment funds under Section 115UA, 115UB.
  • Schedule TR: Shows tax relief claimed under Section 90, 90A, or 91.
  • Schedule 5A: Contains information on the apportionment of income between spouses.
  • Schedule DI: Lists tax-saving deposits, payments, or investments eligible for deduction or exemption.
  • Schedule FA: Presents details of income from sources outside India and foreign assets.
  • Schedule AL: Reveals assets and liabilities at the end of a financial year (applicable for total income exceeding ₹50,00,000).
  • Schedule GST: Provides information on turnover or gross receipts reported for GST.

Part B

  • Part B-TI: Calculates the total income of the taxpayer.
  • Part B-TTI: Computes the tax liability based on the total income.

Verification

Finally, the ITR 3 form structure includes a verification section to authenticate the information provided above.

FAQs

Where can I download the ITR-3 form?

The ITR-3 form can be downloaded from the official e-filing website of the Income Tax Department.

Can I file ITR-3 online?

Taxpayers are required to file ITR-3 online. They need to provide their information electronically and then submit a verification using the ITR-V form.

Why must you file an income tax return?

Taxpayers in India are required to file an ITR in order to declare their income for a specific financial year, claim tax deductions, and request refunds on income tax.

What is the last date to file ITR-3 for 2022-23?

The deadline for filing ITR-3 for the financial year 2022-23 is July 31, 2023.

I am an individual who has income from business and have opted for presumptive taxation. ITR-3 is applicable for me?

If you choose to avail of presumptive taxation for your business or profession, ITR-3 is not suitable for you. Instead, you should use ITR-4 for filing your income tax return.

ITR-3 is applicable for all assessees having a business income?

No, ITR-3 is specifically applicable to individuals or HUFs who have income from business or profession that is not eligible for presumptive taxation.

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