How to File ITR 3: A Step By Step Guide

Income Tax Returns (“ITRs”) filing is a legal obligation and an integral part of financial management for taxpayers. Choosing the correct ITR form ensures compliance, accurate reporting of income, and smoother interactions with tax authorities. Among the various ITR forms, ITR-3 caters specifically to individuals and Hindu Undivided Families (“HUFs”) who have income from business or profession.

ITR-3 is suitable for taxpayers whose income sources are more complex than those covered under ITR-1 and ITR-2. This form facilitates comprehensive reporting for professionals, business owners, and individuals with income from multiple sources, including capital gains.

What is ITR-3?

ITR-3 is an Income Tax Return form designed for individuals and HUFs earning income from proprietary business or profession, as well as other sources like salary, house property, or capital gains.

A. Who can file ITR-3?

Eligibility for filing ITR-3:

1. Income from business or profession: Taxpayers earning income from a proprietary business or practicing a profession (e.g., doctors, lawyers, consultants, etc.).
2. Income from partnership firm: Partners in firms earning income from profit share (exempt) or salary/commission/bonus taxable as business income.
3. Income from salary or pension: Individuals with income from salary or pension, in addition to business income.
4. Income from house property: Includes income from one or more house properties.
5. Income from capital gains: Short-term and long-term capital gains from investments or property sales.
6. Income from other sources: Interest income, dividends, or lottery winnings.
7. Foreign income/assets: Taxpayers with income or assets outside India.
8. Agricultural income: If agricultural income exceeds ₹5,000.
   

Click on this link to access the full form - ITR_3_2024_102833.pdf

Source wise summary of tax

B. Who cannot file ITR-3?

C. How to file ITR-3?

Filing ITR-3 involves providing detailed financial information, especially for business or professional income. It can be done online or offline, as described below:

a) Online Mode

Step 1: Log in to the income tax portal

1. Visit the official Income Tax e-Filing website: https://www.incometax.gov.in/iec/foportal/.
2. Click on Login and enter your PAN/Aadhaar, password, and Captcha.

Step 2: Select ITR-3 form

1. Navigate to e-File > Income Tax Returns > File Income Tax Return.
2. Select Assessment Year (e.g., AY 2024-25).
3. Choose Online Mode for filing.
4. Select the ITR Form Type – ITR-3.

Step 3: Choose filing reason

• Select the reason for filing: 
  • Income above the exemption limit
  • Business/professional income
  • Filing due to tax refund claim

Step 4: Fill in the required details

A. Personal information

• Verify pre-filled details: Name, PAN, Aadhaar, Date of Birth, Address, and Bank Account Details.

B. Income details

1. Salary/Pension income: Enter details from Form 16 (if applicable).

2. House property: Enter details of house property from your rent agreement(s).

3. Business/Professional income:

 Upload profit and loss account, balance sheet, and turnover details.

If applicable, enter GST details and other business earnings.

4. Capital gains income (if any): Upload details of stock trading, mutual funds, or property sales.

5. Other income sources: Interest from savings, fixed deposits, rental income, etc.

C. Deductions and exemptions

Step 5: Verify tax liability

Step 6: Pay tax (if applicable)

If there’s any outstanding tax, generate a Challan 280 and pay online through net banking or debit card.

Step 7: Preview and submit ITR

1. Review all entered details carefully.
2. Click ‘Proceed to Verification’ and select e-verification mode.

Step 8: E-Verify the return (Click here for details - How to e-Verify User Manual | Income Tax Department)

• You can e-verify using: 
  • Aadhaar OTP
  • Net banking
  • EVC through bank account
• If not e-verifying, you must send a signed ITR-V to CPC Bangalore within 120 days.

b) Offline Mode

1. Download the ITR-3 form in Excel/Java utility from the Income Tax Portal.
2. Fill in details such as business income, capital gains, and deductions similar to online mode.
3. Validate the form and generate the XML file.
4. Upload the XML file on the portal and complete e-verification.

c) Documents required:

To file ITR-3 accurately, you need the following essential documents:

1. Income and business details:

• Financial statements (profit and loss account, balance sheet).
• Audit reports (if applicable).

2. Tax and income summaries:

• Form 26AS and AIS/TIS: Reflecting TDS, income from business/profession, and other sources.

3. Salary, bank, and investment details (if applicable):

• Form 16: For salary income.
• Bank statements, interest certificates, and rental income proofs (if applicable).

4. Capital gains and business income:

• Broker and mutual fund statements for shares and securities.
• GST returns and invoices for business income.

5. Deduction proofs (Section 80C, 80D, etc.):

• Life insurance premiums, PPF passbook, tax-saving FD receipts, or NSC statements.
• Health insurance receipts (Section 80D) and donation receipts (Section 80G).
• Home loan interest certificate (Section 24) and education loan repayment statement (Section 80E).

Tips for hassle-free filing:

1. Ensure accuracy in reporting business income and expenses.
2. Maintain proper documentation for income and investments.
3. Use FileAbhi 's assistance if dealing with complex transactions or foreign assets.

Conclusion:

ITR-3 is tailored for individuals and HUFs with business or professional income, making it a comprehensive form for taxpayers with complex income structures. By including features like capital gains, foreign income, and multiple income sources, ITR-3 ensures accurate reporting and tax compliance. Filing ITR-3 correctly provides financial transparency, ensures timely refunds, and avoids penalties.

For more details contact FileAbhi Team.

Frequently asked questions (“FAQs”) on How to File ITR 3

1. Is ITR-3 for presumptive income?

No, ITR-3 is not meant for presumptive income under Sections 44AD, 44ADA, or 44AE. However, a taxpayer having presumptive income can file ITR-3 if they have both presumptive and non-presumptive business income as ITR-4 only allows presumptive income filing.

Also, if a presumptive income taxpayer has other income sources that require ITR-3, such as capital gains or foreign income, they must file ITR 3 and nor ITR 4.

2. How many ITR forms are there on the income tax website?

There are seven types of ITR forms available for different categories of taxpayers:

• ITR-1 (Sahaj) – For salaried individuals with income up to ₹50 lakh.
• ITR-2 – For individuals/HUFs with income from capital gains, multiple house properties, or foreign assets.
• ITR-3 – For individuals/HUFs having business or professional income.
• ITR-4 (Sugam) – For individuals/HUFs/Partnerships under presumptive taxation.
• ITR-5 – For firms, LLPs, AOPs, and BOIs (excluding companies).
• ITR-6 – For companies (except those claiming tax exemption under Section 11).
• ITR-7 – For entities filing under Sections 139(4A), 139(4B), 139(4C), or 139(4D) (e.g., trusts, political parties).

3. Are all ITR forms the same?

No, each ITR form is different and is designed based on the taxpayer’s income sources, category, and tax applicability. Choosing the correct ITR form is essential for compliance and accurate tax filing.

4. How much time does it take to process ITR-3?

If filed correctly and e-verified, ITR-3 is generally processed within 7 to 45 days. However, if manual verification is required or additional tax scrutiny is needed, it may take longer. Refunds (if applicable) are usually processed within a few weeks after verification.