What Is ITR 3 And How To File For A Return With ITR 3?

Income Tax

In India, every taxpayer needs to file Income Tax Returns or ITR forms disclosing their income-related information to the Income Tax Department. It is a kind of self-declaration by taxpayers containing their personal and financial data, such as assets, income including applicable taxes paid. However, the process often gets cumbersome as there are so many different types of ITR forms available. For instance, people earning their revenue from profits or gains of any business or profession need to file ITR-3 for every Assessment Year. If you fall under this category, this brief guide containing details such as eligibility, filing procedure, and structure of ITR-3 is for you. 

Let’s get started!

Meaning & Overview of ITR 3

Individuals and Hindu Undivided Families can fill up the ITR-3 to file their income tax returns. The applicant must either earn income from a proprietary business or a salaried profession.

Income stated under ITR-3 may include income obtained from house rent, salary, pension, capital gains and income from other sources. The applicant can file their ITR-3 within the designated date.

Structure of  ITR 3 Form

The ITR-3 file has 4 main divisions:

1. Part A: This part contains details on the nature of business, manufacturing or trading accounts, etc. Part A-GEN talks about the general information and nature of business. Part A-Manufacturing account shows manufacturing accounts in a financial year.
   
   Part A-Trading an account provides details of trading accounts in a financial year. Part A-P&L reveals the profits and losses during a financial year. Part A-BS shows the proprietary business’s balance sheet. Part A-OI contains other information and is not applicable only to those liable for audit under section 44AB. Part A-QD contains minute quantitative details which are also not liable for audit under section 44AB.   

2. Schedules: This section calculates the income types and discusses capital gains and deductions. Schedule S identifies the different income types under the Salaries section. Schedule BP calculates the taxpayer’s income from professional or business capital gains. 
   
   Schedule HP talks about income from house property. Schedule DPM determines plant and machinery depreciation. Schedule DOA calculates the depreciation on other assets. Schedule DCG contains information on capital gains from the sale of depreciable assets. Schedule CG discusses income from capital gains. Schedule DEP provides a summary of all depreciation on assets. Schedule ESR includes deductions under Section 35 which includes expenditure on scientific research. Schedule 112A requires taxpayers to give details of capital gains whereby Section 112A is applicable. Schedule OS talks about income from other sources. Schedule 115 AD (1) (iii) is applicable only for non-residents which require details of their capital gains under Section 112A. You can get the full list of Schedules on the official website of Income Tax.    

3. Part B: Part B-TI talks about the taxpayer’s total income and ways of computing it. Part B-TTI computes tax liabilities on total income.    
   
4. The Verification division talks about ways of verifying all the information provided. 

Who Is Eligible to File ITR 3?

Only an individual or people belonging to a HUF or Hindu Undivided Family and running their own business will be eligible for filing ITR-3 income tax. Furthermore, persons earning income from the following sources are eligible for it:

• Income-generating from housing properties 
• Income from salary or pension
• Income from foreign assets 
• Income-generating from capital gains (both long-term capital gains and short-term capital gains are applicable)
• Revenue coming from agricultural activities (should be more than Rs. 5,000)
• Income from other sources, such as betting, gambling, winning lotteries, etc. 

Also, note that persons who have opted for a presumptive taxation scheme with a business turnover of over Rs. 2 crores need to file ITR-3 within the due date. 

Also Read: Section 89 Of The Income Tax Act

Importance of Filing ITR-3

ITR 3 filing is not mandatory for all types of taxpayers. However, there are several advantages to doing it. 

• Smoother loan processing: ITR receipts are important supporting documents that financial institutions ask for when you are applying for loans. Providing ITR receipts from the previous year can actually help them secure home/automobile loans. 
• Tax refunds: ITR filing helps individuals to obtain tax reductions and refunds for salaried or self-employed persons. 
• Smoother VISA processing: Many countries want reports of an individual’s tax compliance. Since ITR filing contains information on the applicant’s employment details, it helps determine their survivability. 
• Medical insurance: Section 80D of Income Tax states that health insurance premiums attract tax deductions up to Rs. 50,000 per fiscal year. This is also true for senior citizens receiving pensions.  
• Loss compensation and avoiding penalties: Companies which have filed the ITR can compensate for their losses in a fiscal year. It also enables them to carry such losses forward to the next year. Timely ITR filing also protects individuals and business enterprises from hefty fines of Rs. 1000 for income not exceeding Rs. 5 lakhs and Rs. 10,000 otherwise.   

Who is not eligible to File for ITR 3?

Individuals or HUFs partnering with another business venture or other professions are not eligible for filing ITR-3. Such individuals are supposed to fill ITR-2 instead.  

What are ITR 3 Income Tax Form Due Dates?

The due date for filing ITR-3 forms for individuals or HUFs has shifted from 31st October 2021 to 15th February 2022 for the financial year 2021-22. 

What Is the Process of Filing Income Tax Under ITR 3?

Using the online portal of the Income Tax Department, any taxpayer can easily file ITR-3 and verify the same. One can follow any of the below-mentioned ways to get it done:

• By using a digital signature for verification
• Authenticating by using EVC or electronic verification code
• Using Aadhaar OTP 
• By sending the duly signed acknowledgement form or ITR-V to the Centralised Processing Centre via speed post at this address:

Centralised Processing Centre, Income Tax Department, Bengaluru, Karnataka, 560500

Note that you should send the verification form within 120 days from the day you have filed your ITR. Now let’s check out the steps to file ITR-3 income tax.

Online process:

Step 1: Visit the e-filing portal of the Income Tax Department to start the process. 

Step 2: Click on the right form and fill it up properly. Make sure you verify it after that with your digital signature. 

Step 3: Upon successful completion, you will receive an acknowledgement receipt on your registered email ID. 

Note that for individuals whose digital signatures are not available, the verification can be done using the ITR-V or Income Tax Return Verification form. Assessees generally receive it via email once they file their income tax returns. After signing it, the form must be sent back to the IT Department’s official address.

Offline process:

This procedure is not available for everyone; individuals aged above 80 years can opt for this. Apart from that, those having an annual income of below Rs. 5 lakh can also go for this offline method of filing ITR-3. 

To initiate the process, you need to download the form first. For that, follow these steps:

Step 1: Start by logging into the e-filing website of the Income Tax Department of India.  

Step 2: Find ‘offline Utilities’ under the ‘Download’ tab and click on it.

Step 3: Next, you need to click on ‘Income Tax Return Preparation Utilities’.

Step 4: Now, choose the right Assessment Year and tap on the ‘Excel Utility’ option to download the form. 

Once you have extracted the ITR form, make sure to fill it up with accurate details and submit it in a bar-coded or paper form. 

Now that you have a clear idea regarding both online and offline methods of filing ITR-3 let’s check how its structure looks for a particular AY.

What is the Structure of ITR-3 for Assessment Year 2022-2023?

For AY 2022-2023, ITR-3 consists of the following parts:

• Part A

• Part A-GEN: General data about the taxpayer and the nature of business
• Part A-BS: Balance Sheet (till 31st March 2021) of the business or profession the taxpayer engages in  
• Part A-Trading Account: Trading Account for that particular FY (2020-2021)
• Part A-P&L: Profit and Loss for that specific FY (2020-2021)
• Part A-OI: Other information (optional, if the assessee is not liable for audit under section 44AB)
• Part A-QD: Quantitative details (optional, in case the taxpayer is not liable for audit under section 44AB)

Other than that, there are some schedules. These are Schedule-S, Schedule-HP, Schedule-DPM, Schedule DEP, Schedule 112A, Schedule-CYLA-BFLA, etc. 

• Part B: Outline of the entire revenue as well as the calculation of tax on the net income liable for tax verification
• Tax Payments: TDS information, advance tax details, etc.

Note that there have been a few changes made in the ITR-3 form for the Assessment Year of 2021-2022. Apart from knowing how to file ITR-3, individuals should also be aware of these changes. 

Changes Incorporated for AY 2021-2022 in ITR-3 Form 

Find the list of changes made in the ITR-3 form below:

• The recipient of the dividend will have to pay tax from 1^st April 2020 onwards. The revision of Section 10(34), Section 115-O, and Section 10(35) has been noticed in the Income Tax Act. 
• In case the taxpayers do not receive the dividend, they will not have to pay advance tax. Therefore, taxpayers can now provide quarterly details of their dividend income in their ITR. 
• There has been an increase in the tax audit threshold limit from Rs. 5 crores to Rs. 10 crores, according to Section 44AB. However, the condition, in this case, is that the cash payment has to be 5% less than the total sales amount.
• Taxpayers will not find the Schedule DI that was available for AY 2020-2021.
• Modifications have been made to Schedule 112A and Schedule 115AD(1)(b)(iii) clauses. Now, taxpayers will get adequate information regarding sale price, the acquisition cost of securities, fair market price, etc. 
• Assessors will find some changes in Part A General Information as well. Now, under section 115BAC, they will get the convenience of going for an alternative tax regime. However, in that case, these taxpayers need to mention the ITR filing date in Form no. 101E and submit the acknowledgement number as well. 

You can find such changes happening in ITR-3 every Assessment Year. To avoid any kind of confusion, one should always be updated regarding these revisions. 

Also Read: Section 115 BAA: Provisions For New Tax Rate For Domestic Companies

How to Calculate Tax on ESOP?

Taxation on Employees Stock Option Plan (ESOP) is collected both when shares are allotted and when they are sold. The tax amount is calculated as the difference between the exercise price and market price on the date of ESOP transactions. The employee can treat this difference as the primary requisite. 

Final Word 

Remember, filling up the verification document is an equally important part of filing your Income Tax Returns. So, when you file ITR-3, keep that in mind and refrain from making any kind of false statement in it. Such activities will be considered a punishable offence under section 277 of the IT Act. 

FAQs on ITR 3

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.