ITR 3 l Income Tax Return - 3 Form l ITR 3 form l ITR 3 means

There are total 7 Income Tax Return Forms under the Income Tax Law and each of the ITR Form is required to be submitted by different category of taxpayers depending upon various factors like the source of income or type of taxpayer and many more. For example, an Individual having income from business or profession shall file ITR-3, if he is not eligible for presumptive taxation.

In this blog, we will discuss the applicability of ITR Form-3 and key points to remember while filing ITR-3.

Generally, ITR Forms are complicated and thus all taxpayers are advised to seek assistance of professionals. The most difficult task in filing ITR is to choose the most appropriate ITR Form.

However as far as ITR-3 is concerned, it is comparatively easy than other ITR Forms. Because, ITR 3 can be filed only when following essentials are satisfied –

Only Individuals or HUFs can file ITR-3.
That Individual/HUF must be engaged in business or profession.
That the individual/HUF is having income from such business/profession.
Lastly, such individual/HUF must not be eligible under Presumptive taxation under Section 44AD or 44ADA or 44AE. However, if the individual/HUF is taxable under presumptive taxation but their income is more than 50 Lakh (in case of profession) or Rs. 2 Crore (in case of business) then also they are required to file ITR-3 only.

Table of Contents

Who can use Income Tax Return form 3 (ITR-3)?

Any individual or a Hindu Undivided Family (HUF), who has

All Income of ITR 2, or
Income Under the head “Business or Profession, or
And Maintains Full Books of Accounts

Who cannot use Income Tax Return form 3 (ITR-3)?

A person who is not an Individual or HUF cannot file ITR 3. Further, such an individual or HUF is covered by clause (a) [ITR-1 (Sahaj)] or clause (ca) [ITR-4 (Sugam)]

Key points to remember while filing Income Tax Return form 3 (ITR 3)

ITR 3 Form can be filed only by an individual or HUF having a business or professional income and maintains full books of accounts.
ITR-3 can be filed only by a Resident, Resident but not ordinary resident and Non-Resident Individual or HUF.
ITR-3 is a more detailed return than ITR-4.

Click here to explore more on Procedure for filing an Income Tax Return (ITR) in India.

Changes in Income Tax Return form 3 (ITR 3) for F.Y 2020-21/ A.Y 2021-22

Threshold limit for Tax Audit is increased from Rs. 1 Crore to Rs. 10 Crore subject to certain conditions

From A.Y. 2021-22, the individuals and HUFs who are eligible to file ITR-3 are required to get the books of account audited when the gross receipts or turnover of their business exceeds Rs. 10 Crore during the Financial Year 2020-21. Provided that –

All of the cash receipts of the business/profession during the relevant FY does not exceed the 5% of total receipts;
All of the cash payments of the business/profession during the relevant FY does not exceed the 5% of total payments;

Disclosure of Marginal relief separately

From AY 2021-22, an assessee who is required to file ITR3 has to disclose the details of surcharge computed before marginal relief and the surcharge computed after marginal relief separately. Thus, the parallel changes have also been made in the ITR Form-3.

No Additional Depreciation is allowed when assessee has opted for New Tax Regime Under Section 115BAC

From AY 2021-22, the individuals and HUFs have two options of tax regime i.e. existing tax rates with deductions and exemptions or the new fixed tax rates without exemptions and deductions.

If the assessee opts for new tax regime then the assessee shall not be allowed to claim additional depreciation. Moreover, the assessee cannot even carry forward the unabsorbed depreciation related to the additional depreciation.

No Carry forward of losses is allowed when assessee has opted for New Tax Regime Under Section 115BAC

An assessee who has opted for new tax regime under Section 115BAC shall not be allowed to set off the carry forwarded losses related to deductions and exemptions available under old tax regime.

Short-Term Capital Gains cannot be shown in Schedule PTI

From AY 2021-22, as assessee having short term capital gains other than those covered under Section 111A of the IT Act, 1961 cannot show or disclose them in Schedule PTI.

Additional Question for Safeguarding the Compliance of Section 92 in ITR Form-3

From AY 2021-22, a new question has been inserted in the ITR Form-3 that whether the assessee is liable to obtain a Transfer Pricing Report Under Section 92E of the IT Act or not. Thereafter, the assessee has to answer that whether such compliance has been fulfilled or not. Moreover, if the assessee clicks yes, then the assessee has to furnish the date of report filing.

Section 50C- Stamp Duty Value of Transferred Property

Section 50C of the Income Tax Act, 1961 states that when the property or land or both is transferred at the value less than the stamp duty value (SDV) adopted by the State Government then the SDV shall be deemed to be the full value of consideration. However, earlier this provision was not applicable when the SDV is up-to 105% of the actual consideration received.

From AY 2021-22, the ceiling limit of 105% has been increased to 110% and the corresponding changes have been made in the ITR Form-3.

Conclusion

We hope all of your doubts related to what is ITR3, how to file ITR 3 and other topics related to ITR 3 are answered. In case of any query, contact your Trustworthy Advisors Manthan Experts.

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