Comprehensive Guide to Filing ITR-3 in India

Learn how to file ITR-3 in India with our handy guide. Discover eligibility criteria, key components, necessary documents, and step-by-step instructions for a smooth filing process.
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14 June 2024

In India, the Income Tax Return-3 (ITR-3) form is a crucial document for individuals and Hindu Undivided Families (HUFs) who have income from business or profession. It's designed to cater to taxpayers who need to declare their income under a presumptive taxation scheme, income from partnerships, and other specific sources. This comprehensive guide will walk you through everything you need to know about filing ITR-3, ensuring compliance with tax regulations and maximizing deductions where applicable.

Understanding the eligibility criteria

Before diving into how to file ITR-3, it’s important to understand who is eligible to use this form:

  1. Individuals and HUFs: Those who have income from a business or profession.
  2. Income sources: The form is suitable for those with income from proprietary businesses, professions, salary/pension, house property, capital gains, and other sources.
  3. Exclusions: ITR-3 is not applicable for individuals who are partners in a firm, as they must use ITR-2.

Key components of ITR-3

Filing ITR-3 involves several key components that need to be meticulously filled out:

  1. Personal information: Basic details like name, address, PAN, and Aadhaar.
  2. Income details: Comprehensive income reporting from business/profession, salary/pension, house property, capital gains, and other sources.
  3. Deductions: Claims under various sections like 80C, and 80D.
  4. Tax computation: Calculation of total income and tax liability.
  5. Bank details: Information about all bank accounts held during the financial year.
  6. Verification: Self-declaration affirming the accuracy of the information provided.

Preparation before filing ITR-3

To ensure a smooth filing process, gather the following documents and details:

  1. PAN and Aadhaar card: For identification and verification purposes.
  2. Form 16: If you have salary income.
  3. Bank statements: Reflecting your income and expenses.
  4. Business/professional income details: Income and expenditure details, profit and loss account, balance sheet.
  5. Investment proofs: Documents supporting claims for deductions under sections like 80C, 80D.
  6. Form 26AS: Tax credit statement for the financial year.

Step-by-step guide to filing ITR-3

  • Step 1: Check eligibility for ITR-3:
    Before starting the process, ensure you're eligible to file ITR-3. This form is specifically for individuals and HUFs with income from a proprietary business or profession. Also, if you have income sources like capital gains, income from multiple houses, and income from other sources, you need to file ITR-3.
  • Step 2: Gather relevant documents:
    Arrange all necessary documents like your PAN card, Aadhaar card, bank account details, income and expense details related to your business or profession, balance sheet and profit & loss account details, Form 26AS, and proofs for any tax-saving investments.
  • Step 3: Visit income tax e-filing portal:
    Visit the income tax department's official e-filing portal (www.incometaxindiaefiling.gov.in) and login to your account using your user ID (PAN), password and captcha.
  • Step 4: Select 'Filing of Income Tax Return':
    After login, click 'e-file' option and select 'Filing of Income Tax Return' from the dropdown. Select 'ITR-3' as the ITR form name.
  • Step 5: Complete the form:
    You will be required to fill in various details like personal information, current address, your business or profession code as per the income tax law, details of your income, deductions claimed under various parts of the IT Act, tax details, and more.
  • Step 6: Fill schedule BP:
    This section requires the most detail as it pertains to your business or profession. Information pertaining to your trading account, manufacturing account, profit & loss account, balance-sheet details, and others have to be given here.
  • Step 7: Validate information before submission:
    As you fill in the form, the portal auto-calculates the total income and tax thereon. Once all the relevant data is provided, validate the information. Cross-check the information with your supporting documents diligently to avoid any discrepancies.
  • Step 8: Pay the tax and submit your ITR form:
    Pay off any outstanding tax and then proceed to submit your ITR form. An acknowledgment number will be generated.
  • Step 9: E-verify your ITR:
    The final step is e-verification of your ITR, either via Aadhaar OTP, EVC generated through a bank account, demat account, net-banking, pre-validated bank account, or sending a signed ITR-V (Income Tax Return Verification Form) through regular or speed post.

Remember, the ITR-3 form is significantly more detailed than other ITR forms and may require professional help, especially for those not accustomed to understanding terms used in balance sheets or profit and loss accounts.

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Frequently asked questions

Can I file ITR 3 offline?

Yes, you can file ITR-3 offline, but this option is available only to individuals who are at least 80 years old during the previous year or to an individual or HUF whose income does not exceed five lakh rupees and who has not claimed any refund in the return of income.

Can we file ITR 3 without audit?

Yes, you can file ITR-3 without an audit provided your sales or turnover is less than the appropriate threshold under Sections 44AD, 44ADA, or 44AE of the Income Tax Act. However, if the turnover exceeds the threshold or profit is lower than the deemed profit, tax audit becomes mandatory.

Can we shift from ITR 3 to ITR 2?

Yes, you can shift from ITR 3 to ITR 2 if your source of income changes from a business/profession (for which ITR 3 applies) to salaried/Pension income or income from multiple houses or income from Capital Gains (for which ITR-2 applies). It depends on the nature and source of your income.

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