written by | April 21, 2022

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

Individuals and Hindu undivided families (HUFs) with revenues and gains from a company or profession need to file the ITR-3. Individuals who earn income from the following sources are entitled to file ITR 3. It is for individuals and HUFs who have income from "earnings or gains from business or profession" but are not entitled to file SUGAM (ITR-4). ITR-3 form is used when the assessed income falls into one of the following categories:

  • Earnings from working in a profession
  • Profits from a personal business
  • The business returns might also contain the residential property, salary or pension, and other sources of revenue.

Did you know

ITR 3 form filing comes with the option of instant verification within 120 days by its online portal.

What is ITR-3?

ITR-3 is a tax form used by individuals and Hindu undivided families (HUFs). An assessee must make revenue through a sole proprietorship business or a profession to file income tax returns using the ITR-3 form. You can file income tax returns if you earn money through a small business or a career in accounting, architecture, medicine, engineering, or other related fields.

If a partner in a firm does not have any income from the firm in the form of interest, salary, or other forms of compensation and solely has exempt income in the form of a share in the firm's profit, the assessee must use the ITR-2 form.

Also Read: How To File ITR (Income Tax Returns) Online – Income Tax E-filing Guide For FY 2020-21

What Is the Structure of the ITR-3 for AY 2021-22?

The sections of the ITR-3 Form for AY (assessment year) 2021-22 are as follows:

  • Part A
  • Schedules
  • Part B
  • Verification

Part A

  • Part A-GEN: General Information and Business Description
  • Part A-BS: Balance Sheet of the Proprietary Business or Profession as of March 31, 2021
  • Part A-MANUFACTURING ACCOUNT: Manufacturing Account for the financial year 2020-21
  • Trading Account (Part A): Trading Account for the fiscal year 2020-21
  • Profit / Loss for the Year 2020-21 (Part A-P&L)
  • Other Information (Part A-OI) (optional in a case not liable for audit under Section 44AB)
  • Quantitative Details (Part A-QD) (optional in a case not responsible for audit under Section 44AB)

Part B

  • Part B-TI: It entails calculating a taxpayer's total earnings.
  • Part B-TTI: This section determines the amount of tax owed on a person's overall income.

Verification

Finally, the ITR 3 structure includes verification to verify previously provided information.

How to File ITR-3?

Eligible taxpayers can use the income tax department's e-filing system to submit a completed ITR-3. They can file the return online and use the digital signature to verify it. Otherwise, you can file your return online and use ITR-V to prove it.

The details are sent to your registered email address if you submit your ITR-3 Form electronically with a digital signature. You can also choose to download it from the IRS website directly. Within 120 days of e-filing, you must sign it and transmit it to the Income Tax Department's CPC headquarters in Bangalore. Remember that ITR-3 is an annexure-free form, which means you don't have to send any documents with it.

Changes in ITR-3

The amendments listed below have been implemented into the ITR-3 Form for FY 2020-21:

  • Beginning April 1, 2020, the dividend recipient will be required to pay tax. The Act has been revised to include 10(35), 10(34), 115-O, and others. 
  • If the payout is not received, the taxpayers are exempt from paying the advance tax burden. As a result, the ITR form allows taxpayers to report quarterly dividend income to calculate interest under section 234C for failing to pay advance tax.
  • Under section 44AB of the Finance Bill 2021, the threshold level for tax audit has been enhanced from ₹5 crores to ₹10 crores if cash payments are less than 5% of total sales or turnover. The appropriate adjustments are made in the ITR form.
  • In the ITR form for AY 2021-22, the Schedule DI added AY 2020-21 to claim deductions for investments or expenditures undertaken in the extended period (1st April 2020 to 30th June 2020) has been eliminated.
  • The taxpayer gets to choose a new tax regime under section 115-BAC, which modifies Part-A General Information.
  • A taxpayer with business or professional income who chooses an alternative tax regime must state the date of submitting form 10-IE and the acknowledgement number.

The taxpayer must disclose:

  • The amount of cash deposits in current accounts with a bank exceeding ₹1 crore,
  • Overseas travel expenses exceeding ₹2 lakhs
  • Electricity expenditures of more than ₹1 lakh.
  • If a person is a company director or has unlisted stock investments, the 'kind of company' should also be stated.
  • In the case of short- or long-term capital gains from the sale of land, building, or both, the buyer's information, such as name, PAN or Aadhaar number, percentage share of ownership, and address, must be provided.
  • A separate schedule 112A for calculating long-term capital gains on selling STT-eligible equity shares or units of a business trust.
  • A taxpayer should submit information of 'any other income' under 'income from other sources.'
  • The details of the deductions from 'other sources of income.
  • The 'Schedule VI-A' for tax deductions has been updated to cover section 80-EEA and section 80-EEB deductions.
  • The details of income and 'dividend' income should be supplied in the case of a business trust or investment fund.
  • Information about the tax on secondary adjustments to transfer prices under Section 92CE (2A).
  • Information on tax deduction claims for investments, payments, or expenses made between April 1 and June 30, 2020.
  • If a taxpayer has more bank accounts for refund credit when giving bank account information, the income tax department may choose an account to process the refund.

Also Read: How To Generate Income Tax Return XML File

How to Fill Out the Verification Document?

Fill out the appropriate information in the Verification form if the return is to be submitted on paper, electronically with a digital signature, or in a bar-coded return format. Before submitting the return, double-check the signature on the verification. Fill in the name of the person who will be signing the return. If you're filing your return electronically, you'll need to fill out Form ITR-V.

Please be aware that anyone who makes a false statement in the return or any accompanying schedules will be prosecuted under section 277 of the Income-tax Act, 1961, and sentenced to harsh imprisonment and a fine if convicted.

Every citizen should disclose their income and file for income tax. This is very helpful in carrying out certain processes like visas, loans, and many other documents. The documents you provide for the income tax return filing are essential, and make sure you provide the correct documents to have the proper tax filing. All you need to do is concern the experts and the CA who will help you guide the income tax returns filing. The auditors and the experts give you the perfect advice and can help you save the tax.

Conclusion

Hindu undivided families and individuals are all eligible to file ITR-3 Form. An assessee who earns their income from a proprietorship firm or a profession is eligible to file income tax returns using the ITR-3 form. As a result, if you create revenue from a private business or a profession such as accounting, architecture, medicine, engineering, or any other similar field, you can submit the form ITR-3. 
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: How long does it take for ITR-3 to be processed?

Ans:

The intimation also includes a thorough computation of the tax, as calculated by the taxpayers and the IRS. From the time of e-verification or receipt of ITR-V by the CPC, the entire procedure usually takes 30-45 days.

Q: Is it possible to file ITR-4 instead of ITR-3?

Ans:

The ITR-4 form is used by taxpayers who choose a presumptive income scheme under Section 44AD, Section 44ADA, or Section 44AE of the Income Tax Act. If the business mentioned above turnover exceeds ₹ 2 crores, the taxpayer must submit the form ITR-3.

Q: Who is going to file ITR-3?

Ans:

Individuals and HUFs with revenues and gains from a company or profession must file the ITR-3. Individuals who get money from the following sources can file ITR-3: a firm or their business.

Q: Is it necessary to have an ITR-3 balance sheet?

Ans:

You must keep the books of accounts throughout the financial year. Profit & Loss and Balance Sheet are the results of this, and they must be declared when submitting ITR-3. The addition of a balance sheet and P&L is a reporting requirement under ITR-3.

Q: What is ITR-3?

Ans:

Individuals and undivided Hindu families enrolled as 'Partners' in a company utilize the ITR-3. This form does not cover the company's proprietors, and this is true for professionals, but only if they work in a partnership. So now you won't have any doubt about what ITR-3 is.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.