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ITR 3 Form

The Income Tax Act, 1961 offers several forms for filing tax returns, including ITR 3 for individuals and Hindu Undivided Families (HUFs) with income from businesses or professions. It requires reporting income from various sources like salary, capital gains, and house property. For the assessment year 2023-24, new updates include disclosing income from crypto currencies and mandatory details for donation deductions. Filing can be done online via the Income Tax Department's portal, ensuring compliance with due dates to avoid penalties.

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ITR 3 Form

ITR 3 – What Is ITR 3 Form and How to File ITR-3?

ITR 3 – What Is ITR 3 Form & How to File ITR-3?
July 17, 2024

Table of Content

 

The Income Tax Act, 1961 brings to table seven main types of forms which a person can use to file their Income Tax Returns. These are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7. While filing income tax returns, you must choose any of these forms depending on your source of income and taxpayer category.

On this note, if you are an individual taxpayer or HUF member with a proprietorship or business as a source of income, you need to file your tax returns with an ITR 3. For a detailed knowledge of ITR 3 filing, its eligibility, steps and structure, read this blog till the end. 

What Is the ITR 3 Form?

ITR 3 Form is a return form that individual taxpayers and members of Hindu Undivided Families can use to file income tax returns. To be eligible to file ITR with this form, you must have a proprietorship or a business as one of your income sources.

ITR 3 has various tabs for you to report your source of income as salary, capital gains and house property. You can file tax returns with ITR Form 3 online by visiting the official portal of the Income Tax Department. You must verify your details in this form physically or electronically before the final submission. 

Who Is Eligible to File ITR 3 Form?

Now that you have a brief idea of what ITR 3 means, let’s take you through the eligibility criteria that you must fulfil to file returns with it. 

  • Individuals with proprietary business as their source of income

  • Individuals whose income source is a profession

  • Income by way of interest, salary, bonus, commission or remuneration received by him from a partnership firm.

  • If a person is earning from house property, pension or salary, their source of income falls under income from other sources. Such individuals can file returns with ITR 3. 

  • Non-Resident Individual

  • Anybody with income-producing assets situated outside of India.

In short, any individual earning income under the head “profits or gains from profession or business” who is not eligible to file ITR-1, ITR-2 or ITR-4, has to file Form ITR-3. 

Who Is Not Eligible to File ITR 3 Form?

​​Form​ ITR – 3 cannot be used by any person other than an individual or a HUF. Further, an individual or a HUF or partner not having income from business or profession or partnership cannot use​​ ITR – 3.​​

Major Changes in ITR 3 Form for AY 2023-24

Let’s take you through key changes introduced in ITR 3 forms for AY 2023-24. 

1. Reporting of Income from Crypto currencies/ Virtual Digital Assets

The Central Government introduced an amendment in the Income Tax Act to include income from cryptocurrencies and virtual digital assets. This amendment came into force on April 1, 2022. Furthermore, gains from crypto transactions will also face TDS charges under Section 194S. 

Under this amendment, ITR 3 will now include a provision for you to disclose all VDAs you hold for computing your taxable income. Also, you must categorise this income source as ‘income from business or capital gains’ in this form.

If you have any income from cryptocurrencies, consider keeping the required documents handy. This will be of great help while filing ITR returns with the ITR 3 form. You must also check Forms 26AS and AIS to check income from VDAs. This will help ensure respective tax deductions from this income under the newly introduced u/s 194S.

2. Mandatory Disclosure of Donation Reference Number in Case of Donations Under Section 80G

Another new change in the ITR form for AY 2023-24 is that taxpayers now have to mention their DRN or ARN details for donations. This can bring you a 50% deduction on meeting certain criteria. The DRN or ARN is a unique number present on the receipt that you receive from a beneficiary via Form 10B. 

3. Reporting Requirements for Intraday Trading in the New Income Tax

With updated forms, taxpayers are required to disclose turnover from Intraday Trading and Income from Intraday Trading that has been transferred to Profit and Loss account. The new requirement has been listed under the Trading Account Head.

SEBI Registration Number Disclosure for Foreign Institutional Investors

Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) as a part of additional disclosure requirement are required to provide their SEBI registration number.

What is the Structure of an ITR-3 Form for AY 2023-24?

The structure of ITR 3 is broadly classified into three major parts. These are as follows:

Part A of ITR 3

Here are the components of Part A of the ITR 3 Form:

  • Part A-GEN: Holds general information and the nature of business

  • Part-A Manufacturing Account: Contains manufacturing account details for a whole financial year

  • Part-A Trading Account: Trading account details for one financial year

  • Part A P&L: Profit and loss account details for one financial year

  • Part A BS: Balance sheet for year-end for the proprietary business

  • Part A OI: Holds other information that is optional in case of audit u/s 44AB

  • Part A QD: Contains quantitative details that are optional for audit u/s 44AB

Schedules of ITR 3

Some of the important schedules of ITR 3 are highlighted in the list below. 

  • Schedule S: For the computation of income that falls under salaries

  • Schedule BP: Details of income of taxpayers from business or profession

  • Schedule DPM: Schedule provides depreciation on plants and machinery

  • Schedule DCG: Summary of short-term capital gains  on depreciable asset sales

  • Schedule HP: Summary of income under Income from House Properties

  • Schedule DOA:  Summary of depreciation on other assets according to IT Act

  • Schedule 112 A: Taxpayers must provide details of capital gains under Section 112A

  • Schedule ESR: Computation of deductions under Section 35

  • Schedule BFLA: Statement of income after setting off unabsorbed losses from the preceding financial year

  • Schedule 10AA: Calculates deductions under Section 10AA

  • Schedule VI A: Includes all applicable deductions from Section 80C to Section 80U from a person’s total income under Chapter VIA

  • Schedule AMTC: Calculates an assessee’s tax credit under Section 115JD

  • Schedule CFL: It holds statements of loss that will be carried forward to subsequent financial year

  • Schedule UD: For unabsorbed depreciation

  • Schedule 80IB: Consists of deductions under Section 80IB

  • Schedule 80G: Holds information about donations under Section 80G

  • Schedule EI: Contains a statement of income which is not included in an assessee’s total income

  • Schedule GST: For information on turnover or gross receipts for GST

  • Schedule 5A: Contains details on apportionment of income between spouses and individuals

  • Schedule VDA: Holds details of income from Virtual Digital Assets

Part B of ITR 3

Components under Part B of ITR Form 3 are mentioned in the list below. 

  • Part B-TI: Involves calculation of taxpayers’ total income

  • Part B-TTI: This section includes tax liability on an individual’s total income

Step-by-Step Guide to File ITR 3 Online for FY 2023-24

To file ITR Form 3 online, consider following the steps below. 

Step 1: Visit the official e-filing portal of the Income Tax Department and log in with your PAN details and CAPTCHA code. 

Step 2: Locate ‘e-File’ in the menu and go to ‘Income Tax Forms’. Select the assessment year as 2023-24 and ‘ITR Form 3’. Following this, click on ‘Continue’. 

Step 3: Fill up and submit ITR 3 using an online method or download the form and upload the ‘Same as XML File’. 

Step 4: For the online process, you will find a pre-filled form with your personal and income details. You can add tabs or make changes here as required. 

Step 5: In the next step, enter relevant details regarding your profession, business, salary, house property, capital gains and other sources. You can also claim tax deductions in this step under applicable sections and report paid taxes and various details. 

Step 6: Preview the entered information in ITR 3 to verify your details. Evaluate your tax liability and refunds using the ‘Calculate Tax’ option. After approval, click on ‘Submit’. 

Step 7: The portal will ask you to choose a verification option to complete filing ITR 3. You can opt for electronic verification with OTP, DSC or EVC. 

Step 8: Once this verification process is over, the Income Tax Department will send an acknowledgement mail to your registered e-mail. 

How Do I File the ITR 3 Form?

You can file ITR 3 forms using both online and offline methods. 

Online ITR 3 Filing Process

You can use any of the following to file ITR 3 online. 

  1. Use digital signatures while submitting returns online. 

  2. After submitting your ITR 3 online, you will receive a return verification on the ITR –V form which you must mail to the Income Tax Office. 

  3. You can choose to submit your ITR 3 form online with an electronic verification number. 

Business Codes for ITR Forms 

Sector

Sub-sectors

Code

Electricity, Gas and Water

Production, collection and distribution of electricity

05001 
 

Manufacture and distribution of gas

05002 
 

Collection, purification and distribution of water

05003 
 

Other necessary commodity services

05004 

Renting of Machinery

Renting of land transport equipment

08001 
 

Renting of water transport equipment

08002 
 

Renting air transport equipment

08003 
 

Renting agricultural machinery and equipment

08004 
 

Renting construction and civil engineering machinery

08005 
 

Renting of office machinery and equipment

08006 
 

Renting of other machinery and equipment

08007 
 

Renting of personal and household goods

08008 

Real estate and renting services

Purchase, sales and letting lease buildings

07001 
 

Operating real estate of self-owned buildings

07002 
 

Developing and sub-dividing real estate into lots

07003 
 

Real estate activities on a contractual basis

07004 
 

Other real estate and renting services

07005 

Hotels, restaurants and hospitality

Hotels-star rated

10001 
 

Hotels-non star rated

10002 
 

Motels, inns and dharmashalas

10003 
 

Guest houses and circuit houses

10004 
 

Dormitories and hostels at educational institutions

10005 
 

Short stay accommodation

10006 
 

Restaurants with bars

10007 
 

Restaurants without bars

10008 
 

Canteens 

10009 
 

Independent caterers

10010 
 

Casinos and other game of chance

10011 
 

Other hospitality services

10012 

Post and Telecommunication

Post and courier service

12001 
 

Basic telecom service

12002 
 

Value-added telecom service

12003 
 

Maintenance of telecom service

12004 
 

Activities of cable operators

12005 
 

Other posts and telecommunication services

12006 

Research and Development

Natural sciences and engineering

15001 
 

Social science and humanity

15002 
 

Other research and development activities

15003 

Extra-Territorial Organisations and Bodies

Extraterritorial organisations and bodies like the World Bank, IMF, European Commission 

22001 

Social and Community work

Social work activities with accommodations like old-age homes and orphanages

19001 
 

Social work activities without accommodation like creches

19002 
 

Industrial accommodations and chambers of commerce

19003 
 

Professional organisations

19004 
 

Other membership organisations

19005 
 

Other social or community services

19006 

Education services

Primary educations

17001 
 

Secondary education

17002 
 

Technical or vocational secondary or senior secondary education

17003 
 

Higher education

17004 
 

Education by correspondence

17005 
 

Coaching centres and tuition

17006 
 

Other education services

17007 

Due Date for Filing Form ITR 3

The last date to file ITR 3 forms in Non Audit Cases is 31st July for the relevant assessment year and in case of audit applicable is 31st October for accounts that are subject to audit. 

Late Filing Penalties for ITR 3 Form

Filing ITR after the due date can attract penalties and other associated consequences. For late filing of ITR 3 for individuals with income more than Rs. 5 lakh, the penalty is Rs. 5000. However, if your income is below this limit, you must pay a penalty of Rs. 1000. Also, after December 31st, 2023, this penalty will increase to Rs. 10,000. 

Moreover, failure to file the ITR 3 return on time can attract 1% interest per month on your due taxes until the ITR is filed. After December 31st, you must file your updated returns in case of any tax payable. However, they would need to pay an additional 25% tax till March 31st, 2024 and 50% till December 31st, 2024.

Furthermore, non-compliance with ITR filing despite reminders can attract penalties of 50% for underreporting and 200% penalty for wrong information.  

To conclude, ITR 3 is a form that individuals and members of an HUF must file to report their income to tax authorities if they receive income from a business or a profession. Individuals whose source of income is a business, profession or proprietorship must file this form. You can follow the steps above to successfully file ITR 3 online within the due date to avoid penalties. 

FAQs about ITR 3 Form

Q. What is the difference between ITR 3 and ITR 4?

ITR 3 is for individuals and HUFs having income from business or professions which includes individual holding partnership in a firm. 

Whereas, ITR-4 is meant for individuals and HUFs who have opted for the presumptive taxation scheme. The due date of filing ITR-4 is 31st July, since audit is not applicable on presumptive taxation.

Q. How can I verify my ITR 3 form?

To verify ITR 3 form online, you must log in to your Income Tax e-filing account. Under this, select 'Income Tax Returns' under the 'e-filing' tab and go to 'e-Verify returns’. Complete the verification using the Aadhaar OTP option. After entering a 6-digit OTP in your mobile number, you can click on 'validate'. 

Q. Are all assesses with business income supposed to file ITR 3?

If Individuals/HUF having 

  1. Income from business or profession, 

  2. Partner in a partnership firm, 

  3. Director of a company, 

  4. Income from cryptocurrency

  5. Investments in unlisted equity shares

  6. Income from Salary, pension , Capital gains & other sources

are required to file ITR 3. ITR-3 is not applicable for individuals with income only from salary, house property, and capital gains.

Q. Why must you file an income tax return?

Filing income tax returns offers many benefits. It makes the loan approval process quick and hassle-free and lets you claim TDS refunds and carry forward losses. Also, it contributes to nation-building and social welfare. Filing tax returns also lets you get approval for visa and credit card applications. 

Q. Where can I download the ITR 3 form?

Visit the official e-filing portal of the Income Tax Department and click on 'Offline Utilities' under the 'Downloads' tab. Then visit 'Income Tax Return Preparation Utilities' and choose your assessment year. Click on 'Excel Utility' for filing details under ITR 3 and download it. 

Q. Is there a specific format to fill out the ITR 3 forms?

You can file ITR 3 by entering general information, income details, taxes paid and deductions, TDS/TCS credit and verification and declaration and schedules.

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Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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