How to File ITR-3 if You Have Business Income and Salaries
- Farheen Mukadam
- Jul 22
- 9 min read
Filing Income Tax Returns (ITR) is a crucial aspect of tax compliance in India. For individuals who earn income from business or profession, the ITR-3 form is used to report income and claim deductions. This form is designed for self-employed professionals, businessmen, and those receiving income from a business or profession, including income from partnerships, sole proprietorships, or profession-based activities like doctors, lawyers, and freelancers. Understanding how to correctly file ITR-3 is important to ensure compliance and to avoid penalties.
Table of Contents
Who Should File ITR-3?
ITR-3 is specifically for individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) who earn income from a profession or business. Below are the categories of taxpayers required to file ITR-3:
Business Income: Individuals earning income from a business or profession, such as business owners, sole proprietors, and freelancers.
Income from Profession: Professionals like chartered accountants, doctors, architects, and lawyers who earn income from their practice should file ITR-3.
Income from Partnerships: Those receiving income from a partnership firm, including LLPs (Limited Liability Partnerships), should use ITR-3.
Other Sources of Income: This form is also applicable for individuals who have other sources of income, such as interest, dividends, or rental income, in addition to business or profession-based earnings.
In short, if you are a business owner or self-employed professional with income from any profession or business, you are required to file ITR-3.
Key Updates for AY 2025-26
For the Assessment Year (AY) 2025-26, several important updates have been made to the ITR-3 form. These updates are designed to improve transparency, ensure compliance with new tax regulations, and streamline the filing process. Some key changes include:
TDS Section Enhancements: There have been revisions in how TDS (Tax Deducted at Source) is reported for individuals with business or professional income. Specific sections for TDS reporting related to business income have been added or updated to ensure better accuracy in claims.
New Disclosure Requirements: ITR-3 now requires additional disclosures for taxpayers involved in certain types of business activities. This includes greater detail on income from profession and details of any capital gains, which was previously part of ITR-2.
Revised Tax Regime Options: For AY 2025-26, the option to choose between the old tax regime with deductions and exemptions or the new simplified tax regime without exemptions has been clarified. This option has been made more explicit in the ITR-3 form.
Changes in Depreciation Reporting: There have been updates to the section where depreciation claims are made. Taxpayers now need to fill out a more detailed table that breaks down the assets for which depreciation is being claimed.
Documents Required for ITR-3 Filing
Filing ITR-3 requires several key documents to ensure that all sources of income are reported accurately. The documents required may vary depending on the nature of your income, but typically, the following documents are needed:
Pan Card: A valid PAN card is required for filing ITR.
Proof of Income:
Business Income: Profit and loss account, balance sheet, and other relevant business documents.
Professional Income: Details of receipts and expenses related to the professional income.
Other Sources of Income: Statements related to income from other sources, such as bank interest, dividends, etc.
TDS Certificates: Form 16A (for income from business or profession) showing the tax deducted at source.
Audit Report: If required, the audit report for the business or professional activity, including tax audit and other certifications.
Capital Gains Documents: Details of any investments sold, such as shares, property, etc.
Deductions and Exemptions: Documentation supporting claims for deductions under sections like 80C (PPF, life insurance), 80D (health insurance), and 80G (charitable donations).
Bank Statements: To cross-check income from other sources and ensure accuracy.
Having all these documents ready will make the filing process smooth and accurate.
Step-by-Step Guide to Filing ITR-3
Filing ITR-3 involves multiple steps that require careful attention. Here is a step-by-step guide to filing the form:
Step 1: Log into the e-Filing Portal
Visit the official Income Tax Department portal.
Log in using your PAN and password.
Step 2: Select the Correct Form
Choose "ITR-3" from the available forms.
Step 3: Fill in Personal Details
Enter personal information such as your name, PAN, and contact details.
Step 4: Report Income from Business or Profession
Fill in details about your business or profession income, including profit and loss statements.
Provide any details on capital gains, if applicable.
Step 5: TDS Details
Report the TDS deducted at source (Form 16A).
Step 6: Claim Deductions
Fill out the section to claim deductions under sections like 80C, 80D, etc.
Step 7: Verify the Information
Carefully verify the details you’ve filled out to ensure there are no errors.
Step 8: Submit the Form
Once all information is accurate, submit the form electronically.
Step 9: E-Verify
You can e-verify your return using Aadhaar OTP, net banking, or by sending a signed physical copy of ITR-V.
Important Deadlines
The key deadline for ITR-3 filing for FY 2024-25 is September 15, 2025, for individuals who are not subject to audit. However, for businesses that require audits, the deadline is October 31, 2025. Belated returns can be filed until December 31, 2025, but it will attract penalties. It’s crucial to file before these deadlines to avoid any late filing fees and delays in refund processing.
Addressing Specific Questions
Can I file ITR-3 if my income is from multiple sources? Yes, ITR-3 can be used if you have income from business, profession, or multiple sources like salary, capital gains, and rental income.
How do I handle depreciation claims in ITR-3? You must provide a detailed breakdown of assets and depreciation claims in the relevant section of ITR-3.
What if I miss the deadline for filing ITR-3? Missing the deadline can lead to penalties and interest charges. However, you can file a belated return until December 31, 2025.
Conclusion
ITR-3 filing is crucial for individuals earning income from business or profession. Understanding the latest updates for AY 2025-26, ensuring you have the right documents, and following the correct steps can help you file accurately and on time. Filing your return before the deadline helps avoid penalties, ensuring a smooth tax filing experience. For those seeking assistance, TaxBuddy offers expert help to make the process simple and efficient. For anyone looking for assistance in tax filing, I highly recommend you download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: Who should file ITR-3?
ITR-3 is designed for individuals and businesses that derive income from a profession or business, including freelancers and self-employed professionals. This includes professionals such as doctors, lawyers, chartered accountants, architects, and business owners who have income from their profession or business. If you earn income through business or profession and do not qualify to file ITR-1 (for salaried individuals) or ITR-2 (for individuals with income from sources like house property or capital gains), then you must file ITR-3. It is also applicable if you have income from multiple sources, such as business profits, professional fees, rental income, or interest.
Q2: What are the documents required for ITR-3 filing?
To file ITR-3, you need the following documents:
Personal Information: Your PAN, Aadhaar, and address details.
Income Details: Proof of business or profession income, including profit and loss statements and balance sheets.
TDS Certificates: Form 16/16A (if you have income from a job or other sources where tax is deducted at source).
Audit Reports: If your business is subject to tax audits, the audit report and financial statements are required.
Deductions and Exemptions: Documents supporting deductions under sections like 80C (life insurance, PPF), 80D (health insurance), 80G (charitable donations), and others.
Bank Statements: For interest income or to verify the details of transactions.
Capital Gains Details: If applicable, details of investments in stocks, mutual funds, or property.
Other Income: Proof of income from other sources, such as rental income, interest, etc.
Having these documents prepared in advance can streamline the filing process and ensure that your return is filed accurately.
Q3: What are the key updates for AY 2025-26?
The key updates for Assessment Year (AY) 2025-26 include:
Changes in TDS Reporting: Tax Deducted at Source (TDS) reporting has been updated to include more detailed disclosures. This ensures transparency and helps the Income Tax Department cross-check the TDS credits efficiently.
Tax Regime Options: The option between the new tax regime (which offers lower tax rates but without deductions) and the old tax regime (which allows for various deductions) continues for the AY 2025-26. Taxpayers need to carefully consider their tax obligations under both regimes.
Depreciation Claims: There have been clarifications regarding depreciation claims, especially for capital assets. Businesses need to ensure that depreciation is claimed correctly on their assets, especially with new provisions that impact depreciation under the new tax regime.
Updated Forms: There have been changes to ITR forms for reporting income and deductions. New sections have been added to ensure compliance with the updated tax structure and rules.
These updates make it crucial to carefully review your tax filings, ensuring that all necessary disclosures are made and deductions are maximized.
Q4: Can I file ITR-3 if I have multiple sources of income?
Yes, ITR-3 is specifically designed for individuals who have income from multiple sources. This includes income from business or profession, salary, capital gains, rental income, and other sources. If you have income from both a business or profession and other sources, such as interest or dividends, ITR-3 is the correct form for you. It allows for reporting all sources of income in a single form, making it easier to file taxes on diversified income streams.
Q5: What is the last date to file ITR-3 for AY 2025-26?
The last date to file ITR-3 for Assessment Year 2025-26 is September 15, 2025, for individuals and businesses that do not require an audit. However, businesses and professionals that need to undergo an audit must file their returns by October 31, 2025. If you miss the filing deadlines, you can still file a belated return by December 31, 2025, but this will attract penalties and interest on any unpaid taxes.
Q6: Can I revise my ITR if I made an error in ITR-3?
Yes, you can revise your ITR if you realize that you made an error after submission. You can file a revised return under Section 139(5) before the end of the assessment year. The revised return will replace the original one, and it will allow you to correct mistakes such as incorrect income reporting, missed deductions, or errors in reporting capital gains. It's important to file the revised return as soon as you identify the error to avoid penalties and interest.
Q7: What if I miss the ITR-3 filing deadline?
If you miss the ITR-3 filing deadline, you can still file a belated return, but you will be liable to pay a penalty. The penalty for filing a belated return can range from ₹1,000 to ₹5,000 depending on when you file and whether your income exceeds the specified threshold. In addition to penalties, you will also incur interest on any unpaid tax under sections 234A, 234B, and 234C. Therefore, it is always advisable to file within the due date to avoid these penalties and the delay in receiving your refund.
Q8: How do I claim deductions in ITR-3?
Deductions can be claimed under various sections in ITR-3. Some of the most common ones include:
Section 80C: For investments in PPF, EPF, NSC, tax-saving fixed deposits, and life insurance premiums.
Section 80D: For premiums paid on health insurance policies for self, family, and parents.
Section 80G: For donations made to charitable organizations.
Section 80E: For interest paid on education loans.
Section 10(13A): For House Rent Allowance (HRA) exemptions. Ensure you have proper documentation and receipts to back up your claims for these deductions to avoid scrutiny.
Q9: Can I file ITR-3 if I am a salaried employee with a side business?
Yes, you can file ITR-3 if you are a salaried employee with a side business. ITR-3 is for individuals who earn income from both salary and business or profession. You must report your salary income (as per Form 16) and income from your side business, which can include freelance work, consulting, or any other self-employment. This form allows you to report income from both sources and claim deductions and expenses associated with the business.
Q10: Is it necessary to file ITR-3 if I earn only from business or profession?
If your only source of income is from business or profession, you must file ITR-3. This form is meant for individuals who are self-employed or have a business and do not fall under the categories of salaried employees or individuals with income from capital gains or other sources. Whether you are a freelancer, small business owner, or independent contractor, ITR-3 is the appropriate form for reporting business income.
Q11: What happens if I file the wrong ITR form?
Filing the wrong ITR form can result in delays and penalties. If you file an incorrect form (for example, ITR-1 instead of ITR-3), the Income Tax Department may reject the return, and you may need to file the correct form. In some cases, the department may ask for clarification or additional information. To avoid this, ensure that you file the appropriate form based on your income sources and filing requirements. If you realize the mistake after filing, you can submit a revised return under Section 139(5).
Q12: Can I file ITR-3 if I have foreign income?
Yes, ITR-3 can be used by individuals who have foreign income, such as income from a foreign business, foreign salary, or investments. You must report your foreign income under the appropriate section, such as “Income from Business or Profession” or “Income from Other Sources.” Additionally, if you qualify for any deductions related to foreign income or foreign tax credits, you can claim them in the appropriate sections. It's important to ensure proper reporting and documentation of foreign income to avoid scrutiny by tax authorities.
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