ITR-3: What is ITR 3 Form & How to File Online ITR-3 Form?
Updated: Jan 18
As a part of the series on Income Tax Returns and everything that goes into them, I previously covered ITR-1 and ITR-2. Moving on to the third, let's take a quick look at some fundamental aspects of ITR-3 FORM on the pleasantly sunny and productive day that it is today.
Table of content
An income Tax Return (ITR) is a document that contains details about a person's income and the corresponding taxes paid during the year and is submitted to the Income Tax Department of India. The ITR form that applies to you will depend on the type of income, the category of a taxpayer (Individuals, Association of Persons, Hindu Undivided Family, firms, companies, and Body of Individuals), and the income bracket. Choosing the wrong form can lead to having to redo the filing process.
What is the ITR-3 Form? A comprehensive guide
An essential document Indian taxpayers need to disclose their income when they have revenue from a private company or profession is the ITR-3 Form, sometimes called the "Income Tax Return Form 3." Under 'Profit or Gains of Business or Profession,' this form applies to individuals and Hindu Undivided Families (HUFs) who are partners in a company but do not have any income from either a business or a profession.' This form is one of the several Income Tax Return (ITR) forms that the Indian Income Tax Department has mandated.
Complete facts on the taxpayer's personal information, income, and tax calculation must be included on the ITR-3 form. Additionally, information regarding the partnership company, including its name, location, profit-sharing ratio, and partnership type, must be provided by individuals and HUFs using this form.
For taxpayers to guarantee conformity with Indian income tax laws, filing the ITR-3 form is essential. It aids in the government's assessment of taxpayer income computation of tax liabilities and guarantees that people and organizations pay their fair share of taxes into the national coffers. The ITR-3 form must be submitted promptly and accurately to prevent fines and legal ramifications.
Overview of ITR 3 Form- Purpose and Applicability
For individuals and Hindu Undivided Families (HUFs) operating private enterprises or partnerships, the ITR-3 form is a complete document that provides a platform for declaring income, deductions, and tax obligations. Facilitating the evaluation of revenue under the heading "Profit or Gains of Business or Profession" is its primary goal. ITR-3 made explicitly for business partners, records business revenue in detail so taxpayers can fully disclose their financial operations.
This form, which applies to people and HUFs in partnerships who do not have revenue from their own company or profession, guarantees adherence to income tax laws in India. It requests particulars regarding the partnership company, such as business specifics and profit-sharing percentages. The ITR-3 form is essential for expediting the income tax filing process and promoting an open and responsible financial environment as it meets the special demands of these taxpayers.
What are the Eligibility Criteria for ITR 3?
Hindu Undivided Families (HUFs) and individuals with various income sources within a particular assessment year are intended to use the ITR-3 form. It is relevant in particular if the overall revenue consists of:
Income from a Business or Profession: ITR-3 forms must be filed by owners of a proprietorship company. This includes situations about company or professional revenue that are audited or not.
Revenue from Residential Properties: ITR-3 allows for reporting revenue from residential properties, whether from one or more.
Other sources of Income: In ITR-3, the 'Income from Other Sources' category includes those who get awards for winning lotteries, horse racing, and other unspecified activities.
Foreign Assets: ITR-3 forms must be filed by anybody with income-producing assets situated outside of India.
Capital Gains: To meet their tax reporting requirements, individuals and HUFs that fall under this category, regardless of whether their income is from short-term or long-term capital gains, should choose ITR-3.
Comprehending these varied sources of income guarantees precise and thorough reporting via the ITR-3 form.
Who Should File ITR 3?
Hindu Undivided Families (HUFs) and people who receive income under the heading of "profits or gains of business or profession" are the target audience for ITR-3; they are not eligible to submit Forms ITR-1 (Sahaj), ITR-2, or ITR-4 (Sugam). This form is intended primarily for those running partnerships or proprietary firms. It ensures proper reporting and adherence to income tax requirements by serving clients with complex financial arrangements. ITR-3 is the proper platform for complete tax filing if a person or HUF is not eligible for the previously specified forms because of business or professional income.
Exemptions and Limitations of ITR-3
If your gross income is above the basic excise rate, you must file an ITR. This hindrance is set at 2.5 lakh rupees for individuals who are below 60 years old, 3 lakh rupees for individuals who fall in the age bracket of 60 to 80 years, and 5 lakh rupe Income considered includes certain deductions under chapter via such as section 80C, 80 CCD, 80D, 80 G, 80 TTA, and 80 TTB but excludes a number. Tax and investment expert Balwant Jain emphasizes that income is considered in the computation before using these deductions.
While people eagerly await their Form-16, which they usually receive from employers by June 15 of the assessment year, it's important to remember that filing an ITR becomes necessary when total income surpasses the designated exemption limits. This encourages financial transparency and compliance with tax laws.
Which Documents Required for ITR 3 Filing
The necessary paperwork for submitting your Income Tax Return (ITR) includes important financial and personal information. The requirements include an Aadhaar card and a valid PAN, which are primary identification. Details about the bank account are essential for accurately processing refunds or paying taxes. Form 16, provided by employers, requires employees to record their pay information. Information on investments, including a range of financial products, helps minimize tax obligations and maximize deductions. When one receives revenue from a company or profession, keeping thorough books of accounts is essential for proper reporting.
Combining these files expedites the ITR filing procedure while guaranteeing accuracy and adherence to tax laws. An accurate and thorough collection of PAN, Aadhaar, bank account information, Form 16, investment records, and company accounts makes tax filing easier and supports an open and responsible financial system.
How to File ITR 3 Online: Step-by-Step Guide?
A step-by-step procedure is involved in filing ITR-3 online to guarantee proper income and deductions reporting. Here's a thorough guide:
Go to the official website of the Income Tax Department
Visit https://www.incometax.gov.in/iec/foportal/ to access the Income Tax Department's official e-filing site.
Log in or Register
As a returner, please log in using your details. It requires signing up as a new user before creating an account.
Choose ITR-3 Form
After logging in, choose the "ITR-3" form and indicate the assessment year you are submitting for.
Go to the e-file tab, under that Income Tax Return, and select File Income Tax Return
Select the Assessment Year and Mode of Filing
Select the ITR-3 Form and then select applicable Schedules under it and continue
Click on Skip The Questions and continue
Enter Your Personal Information:
Enter your name, PAN, Aadhaar, other necessary information, and personal data.
Income Information
List your income under several headings, including "Capital Gains," "House Property," "Income from Business or Profession," and "Other Sources." Add information from Form 16 and any other pertinent papers.
Taxable income and deductions
Report deductions made possible by Sections 80C, 80D, and other laws. Determine your taxable income appropriately.
Tax Calculation
The site will automatically calculate your tax due using the information you supplied.
Verification
Check the summary and confirm the data that was input. Verify all information is correct before submitting.
Fill out the Form
After being satisfied, electronically fill out the ITR-3 form.
Create and Check ITR-V
Download and check the ITR-V (Acknowledgment) after submission. Additionally, your registered email receives the ITR-V.
Verification Procedure
Within 120 days of filing, transmit the signed ITR-V to the Centralized Processing Center (CPC) to finish the verification procedure. As an alternative, you may e-verify with net banking or Aadhaar OTP.
Acknowledgment
You will get an acknowledgment if the verification is successful. The procedure of filing has finished.
By following these guidelines, you may file your ITR-3 online in a methodical and precise manner, which helps to make the tax filing process simple and legal.
Several major changes were introduced in the ITR 3 form for AY 2023-24. Here are some of the key ones:
New Schedule VDA for Virtual Digital Assets:
A dedicated Schedule VDA has been introduced to report income from cryptocurrencies and other virtual digital assets (VDAs).
If you treat VDA income as capital gains, you'll need to provide a quarterly breakdown in the Capital Gains Schedule.
You're now required to mention the Donation Reference Number (ARN) for donations made to entities eligible for a 50% deduction with a qualifying limit.
Additional Disclosures for Advances in Balance Sheet:
ITR 3 now requests additional information about advances given in the Balance Sheet of your business or profession.
SEBI Registration Number for FIIs and FPIs:
If you're a Foreign Institutional Investor (FII) or Foreign Portfolio Investor (FPI) registered with SEBI, you must disclose your SEBI registration number.
Tax Relief under Section 89A:
You'll need to disclose any taxable income on which relief under section 89A was claimed in previous years.
Transfer of Tax Collected at Source (TCS) Credit:
The revised form includes provisions for reporting the transfer of TCS credit to another person.
Registering on the Income Tax Portal
Use these procedures to sign up as an "Individual User" on the Income Tax e-Filing Portal:
1.Check out the Portal:
Go to https://www.incometax.gov.in/iec/foportal/ to access the official e-filing Portal.
2. Register:
Locate and click the 'Register' button on the right side of the Home Page.
3. Select the Taxpayer:
Choose 'Taxpayer' and provide a valid PAN. Select "validate."
4. Verify Individual Registration:
Click "Continue" after confirming that you want to register as an "Individual Taxpayer."
5. Give the Essential details:
Choose your gender, residential status (resident or non-resident), last name, middle name, first name, and date of birth. Select "Continue."
6. Complete the Required Fields:
Enter the data for your primary postal address, primary email ID, and primary mobile number. Select "Continue."
7. Verify OTP:
Residents will get a six-digit mobile OTP and email OTP on the designated cellphone number and email ID. OTP will be sent to non-residents via their main email address. Once the OTPs have been entered, click "Confirm."
8. Create a Password:
After selecting and confirming a password, add a customized message and click "Register."
9. Confirmation:
You shall get an SMS on your cell number and an email to your email address.
Therefore, follow the subsequent steps to effectively register as an “Individual User” on the Income Tax e-Filing Portal and access the platform's related tax services.
Selecting the Assessment Year
Assessment Year refers to 12 months beginning April 1 and ending February/March 31st immediately following the fiscal year. This is a very important period because when it comes to taxing the money accrued from the previous fiscal year. For instance, income realized under the assessment year 2023-2024 will be generated between 1ST April 2022 and 31st March 2023. Assessment years represent when taxes are remitted, wages are taxed, and tax returns are made. To guarantee compliance with tax laws and prevent fines, it is essential that you promptly submit your income tax return within the relevant Assessment Year.
What are the Common Mistakes to Avoid?
Giving meticulous attention to several things is necessary to guarantee a seamless and error-free income tax filing procedure. Choosing the appropriate ITR form according to the kind of income and taxpayer category is an important step. The tax department may issue defect notifications and processing problems due to incorrect form selection, which calls for prompt correction.
It is equally important to quote the correct Assessment Year (AY) to prevent fines and duplicate taxes. Proper personal details such as a person’s name, address, PAN (tax identification number), and bank account information are essential to recover reimbursement quickly and effectively.
Many taxpayers erroneously think there is nothing else to do after they have paid and taxes have been taken out. Nevertheless, filing is still required when yearly income exceeds Rs to ensure accurate income declaration and the ability to claim TDS credits. 2.5 lakh.
It's important to disclose all income sources, including tax-deductible ones, since failing to do so might result in questions from the IRS. To avoid mistakes, manual data input in the ITR forms has to be precise.
It is crucial to reconcile TDS with Form 26AS, as errors might affect refunds. Compiling your revenue sources is necessary when managing many Form 16s from several jobs. Taxpayers should know the deductions they are entitled to and the correct documents needed to claim HRA benefits.
Advance or self-assessment tax payments should be made by March 31st to avoid interest and penalties. Recognizing the taxable nature of NSC interest and the fact that not all gifts are eligible for 100% exemption is crucial.
Finally, timely ITR-V dispatch—either by e-verification or postal submission—ensures that the Income Tax Department processes tax returns within 120 days after e-filing. Practicing accuracy and cognizance improves a taxpayer's financial health and compliance.
Major Changes in ITR-3 Form for AY 2023-24
Filing your Income Tax Return (ITR) can be daunting, but staying updated on the latest changes in the forms can make the process smoother. Here's a look at the major changes introduced in ITR-3 for the Assessment Year (AY) 2023-24:
1. Reporting Income from Cryptocurrencies and Virtual Digital Assets (VDAs):
A new Schedule VDA has been added to ITR-3 specifically for disclosing income from cryptocurrencies and other VDAs.
If you treat VDA income as capital gains, a quarterly breakup will be required under the Capital Gains Schedule.
2. Disclosure of Donations with Donation Reference Number (ARN):
Providing the ARN is mandatory for claiming deductions under Section 80G for donations exceeding ₹10,000 made to eligible entities.
3. Additional Disclosure Regarding Advances in the Balance Sheet:
ITR-3 now requires specific disclosure of advances received from individuals specified in Section 40A(2)(b) of the Income Tax Act and others under the designated "Advances" section. This promotes transparency and accurate reporting of financial transactions.
4. New Questions Regarding the Choice of Tax Regime:
ITR-3 now includes questions to determine whether you have opted for or opted out of the New Tax Regime in previous assessment years.
This helps the department track your opted regime and ensures accurate tax calculations.
5. Increased Focus on Foreign Transactions:
ITR-3 now asks whether you are a Foreign Institutional Investor (FII) or Foreign Portfolio Investor (FPI) registered with SEBI, requiring the disclosure of the SEBI registration number in such cases.
This information is crucial for tracking overseas investments and potential tax liabilities.
Remember:
These are just the major changes, and it's recommended to carefully review the entire ITR-3 form and consult a tax professional for personalized guidance.
Staying informed about these updates will ensure you file your return accurately and avoid any discrepancies or penalties.
Who can use ITR-3?
This Return Form is for individuals or Hindu Undivided Families who earn income under the head "profits or gains of business or profession" and are not eligible to file Form ITR-1 (Sahaj), ITR-2, or ITR-4 (Sugam).
The following are the conditions that need to be satisfied to use ITR Form 3 for filing an income tax return:
When the taxpayer is a director of a company or business
When the taxpayer's residential status is either a resident or non-resident of India
When the taxpayer receives income from a pension
When the taxpayer earns income from house property
When the taxpayer has investments in unlisted equity shares
When a taxpayer's income is taxable under the category of 'profits and gains of business or profession', which includes salary, interest, commission, bonus, or remuneration
Please note that if a person or a Hindu Undivided Family (HUF) earns income as a partner in a partnership firm involved in a trade or profession, they are not eligible to file an ITR-3. Instead, they should file an ITR-2 in this case. Also, those with income earned from foreign assets are not eligible for this form.
You can file this return form electronically through the e-filing web portal of the Income-tax Department (www.incometaxindiaefiling.gov.in)or by sending a signed paper Form ITR-V to the CPC at the given address. The Form ITR-V should get sent within 120 days of e-filing the return, and the confirmation of receipt will be sent to the registered e-filing account. If an assessee is required to furnish an audit report, the return must be verified electronically with a digital signature. If a report of the audit is required under sections 10AA, 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB, or 115JC, it should be filed electronically one month before the due date of filing the income tax return.
There are three methods available to complete the ITR-3 Income Tax Return Form:
1) Electronic filing of the return with a digital signature (mandatory for assessors requiring a tax audit).
2) Submitting the information in the ITR-3 form electronically along with a digital verification code.
3) Sending the data in the ITR-3 form electronically and mailing the ITR-V form, which serves as a return verification, to the income tax office. (Taxpayers who file ITR-3 forms using this method must fill out the ITR-V acknowledgment.)
Let's dive into the changes introduced to the forms other than ITR-1 in the union budget 2023:
The forms other than ITR-1 now have a new schedule for reporting income earned from Virtual Digital Assets (VDAs) under the Capital Gains category.
To fill this new schedule, taxpayers are required to provide information about the date of acquisition, date of transfer, cost of acquisition, and proceeds received from the sale of VDAs. Quarterly reporting of VDA income is mandatory.
The forms have been updated to include additional questions related to the selection of the new tax regime.
Taxpayers are required to indicate if they opted for the new regime in the previous assessment year, and select the assessment year in which they made the choice.
Furthermore, another question got added asking whether taxpayers opted out of the New Regime in any of the previous years and providing details about both selections using the 10IE form.
It is understandable if you feel inundated with many questions on which return form applies to the nature of your income, business, or profession. I assure you TaxBuddy is the platform for you! I, with my team, will help you every step of the way, from filing to tax planning.
FAQs
Q1 Who should file the ITR-3 form?
For individuals and Hindu Undivided Families (HUFs) having income from profits or gains from a company or profession, the ITR-3 form is meant. It is relevant to partners in a company who do not personally earn money from their business or occupation. If you fulfill these requirements and receive income from a partnership or private firm, you should submit the ITR-3 form. It guarantees compliance with Indian income tax laws and proper income reporting connected to businesses.
Q2 How to file ITR-3 Online?
To submit your ITR-3 online, do these actions:
Go to the authorized income tax electronic filing website.
If you are a new user, please log in or register.
To get the applicable assessment year's ITR-3 form, choose it.
Enter your personal information, income, and company or occupation data.
Utilize the online calculator to determine your tax burden.
Check the details, then send the form in.
Download the ITR-V, e-verify by net banking or Aadhaar OTP, or, if necessary, email a signed copy to CPC.
Once verified, your ITR-3 file is complete and aligned with income tax requirements. Please visit the Taxbuddy portal for more information.
Q3 What is the reason for ITR 3?
Individuals and Hindu Undivided Families (HUFs) with business or professional gains income can file their taxes using the ITR-3 form. It primarily serves business partners who do not have independent sources of income from their careers or businesses. ITR-3 guarantees proper reporting and adherence to income tax rules by requesting comprehensive information regarding company income, partnerships, and other financial activities. The form provides a customized platform for individuals and HUFs involved in proprietary firms or partnerships to clearly and fully meet their tax reporting duties.
Q4 What are ITR 1 and ITR 3?
India has two separate income tax return forms: ITR-1 and ITR-3. Individuals having income from salary, one residential property, and other sources such as interest income are eligible to file ITR-1, often referred to as Sahaj. It is easier to understand and appropriate for those with fixed sources of income. Conversely, ITR-3 is intended for individuals and Hindu Undivided Families (HUFs) who benefit from business or professional gains, particularly those in partnership. It supports more intricate financial arrangements, such as company revenue, and guarantees proper reporting for those running partnerships or private enterprises.
Q5 Who is not eligible for ITR 3?
ITR-3 is unavailable to individuals or Hindu Undivided Families (HUFs) who do not get income from business or professional earnings or profits. Furthermore, if a taxpayer meets ITR-1 (Sahaj) or ITR-2 requirements but has a business or professional income, they should utilize the appropriate form instead. ITR-3 ensures proper reporting of business-related income and is specially developed for partners in a company or those engaged in private companies. If the income profile of a person or HUF does not meet the requirements for ITR-3, they should choose the relevant ITR form according to the kind and sources of their income.
Q6 Can a salaried person file an ITR-3 form?
A salaried individual often does not submit an ITR-3. This form is intended for those who earn money from their company or profession and Hindu Undivided Families (HUFs). Salaried people often file either an ITR-1 or an ITR-2, depending on how complicated their financial circumstances are. However, a salaried individual may have to submit an ITR-3 if they are also a partner in the company or if they have revenue from a private business that has to be reported. Selecting the correct ITR form according to the kind of income is essential for accurate and legally compliant tax reporting.
