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Sharanya Radhakrishnan Nair

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Demystifying ITR-3: A Guide for Business Owners and Professionals.

In the complex realm of income tax filing in India, ITR-3 stands out as a crucial form catering to a specific group of taxpayers. This form caters to individuals and Hindu Undivided Families (HUFs) with income from business or profession, making it slightly more complex than other ITRs This blog aims to demystify ITR-3, shedding light on its intricacies and provide valuable insights for taxpayers navigating through the process.

Who needs ITR-3?

If you run a business or practice a profession (doctor, lawyer, etc.), generating income through your skills and expertise, then ITR-3 is your designated form. Additionally, any HUF earning income from a business or profession must also navigate this path.commercial production before their incorporation.

What are the key components of ITR-3?

This form is divided into various sections, each demanding specific information:

  • Part A: General Information: Basic details like address, PAN, and bank account details.
  • Part B: Income from Business or Profession: Declare your gross income, expenses, depreciation, and other relevant business-related information.
  • Part C: Deductions and Exemptions: Claim exemptions under various sections like housing loan interest, medical expenses, and investments.
  • Part D: Income from Other Sources: Report income from sources like interest, rent, or capital gains.
  • Part E: Tax Computation: Calculate your final taxable income and tax liability.

Key Components of ITR-3:

Source of Income: ITR-3 encompasses income derived from a profession or business. This can include consultancy fees, professional charges, or profits from any entrepreneurial ventures.

  • Disclosure of Financials: Taxpayers filing ITR-3 need to provide detailed financial statements, including the profit and loss statement, balance sheet, and a computation of the total income.
  • Partner Details: If the taxpayer is a partner in a firm, the form requires the disclosure of details about the partnership, including the name, PAN, and share of profit.
  • Presumptive Taxation Scheme: Individuals opting for the presumptive taxation scheme under Section 44AD or 44ADA need to furnish relevant details in ITR-3.



What documents are required to file ITR-3?

  • PAN card
  • Form 16 (if applicable)
  • Bank statements
  • Investment proofs (capital gains, interest income)
  • Business/profession income and expense records
  • Receipts for deductible expenses (medical bills, donations, etc.)



What is the structure of the ITR-3 Form?

The ITR-3 form, also known as the Income Tax Return Form 3, is structured to capture detailed information from individuals and Hindu Undivided Families (HUFs) with income from business or profession. Here is an overview of the key sections in the ITR-3 form:

  • Part A 
  • Part A-GEN: General Information and Nature of Business
  • Part A-BS: Balance Sheet as of March 31, 2024, of the Proprietary Business or Profession
  • Part A- Manufacturing Account: Manufacturing Account for the financial year 2023-24
  • Part A- Trading Account: Trading Account for the financial year 2023-24
  • Part A-P&L: Profit and Loss for the financial Year 2023-24
  • Part A-OI: Other Information (optional in a case not liable for audit under Section 44AB)
  • Part A-QD: Quantitative Details (optional in a case not liable for audit under Section 44AB)
  • Schedule S: Computation of income under the head ‘Income from Salary.’
  • Schedule HP: Details of income from house property.
  • Schedule BP: Computation of income from business or profession.
  • Schedule DPM: Depreciation on Plant and Machinery (Other than assets on which full capital expenditure is allowable as deduction under any other section)
  • Schedule DOA: Depreciation on other assets (Other than assets on which full capital expenditure is allowable as deduction)  
  • Schedule DEP: Summary of depreciation on assets (Other than assets on which full capital expenditure is allowable as deduction under any other section) 
  • Schedule DCG: Deemed Capital Gains on sale of depreciable assets
  • Schedule ESR: Expenditure on Scientific Research etc. (Deduction under section 35 or 35CCC or 35CCD) 
  • Schedule CG: Computation of income under the head ‘Capital Gains.’
  • Schedule 112A: From the sale of equity shares in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under section 112A 
  • Schedule VDA: Income from transfer of virtual digital assets 
  • Schedule OS: Details of income from other sources.
  • Schedule CYLA: Details of income after setting off of current year losses.
  • Schedule BFLA: Details of Income after Set off of Brought Forward Losses of earlier years
  • Schedule CFL: Details of carry forward losses of earlier years.
  • Schedule UD: Details of unabsorbed depreciation.
  • Schedule ICDS: Computation of income as per the Income Computation and Disclosure Standards.
  • Schedule 10AA: Deduction under section 10AA
  • Schedule 80G: Statement of donations entitled for deduction under section 80G.
  • Schedule RA: Statement of donations to research associations etc. entitled for deduction under section 35(1)(ii) or 35(1)(iia) or 35(1)(iii) or 35(2AA)
  • Schedule- 80IA: Computation of deduction under section 80IA.
  • Schedule- 80IB: Computation of deduction under section 80IB.
  • Schedule- 80IC/ 80-IE: Computation of deduction under section 80IC/ 80-IE.
  • Schedule VI-A: Statement of deductions (from total income) under Chapter VIA.
  • Schedule AMT: Computation of Alternate Minimum Tax Payable under Section 115JC
  • Schedule AMTC: Computation of tax credit under section 115JD
  • Schedule SPI: Statement of income arising to spouse/ minor child/ son’s wife or any other person or association of persons to be included in the income of the assessee in Schedules-HP, BP, CG and OS.
  • Schedule SI: Statement of income which is chargeable to tax at special rates
  • Schedule-IF: Information regarding partnership firms in which assessee is a partner.
  • Schedule EI: Statement of Income not included in total income (exempt incomes)
  • Schedule PTI: Pass through income details from a business trust or investment fund as per section 115UA, 115UB
  • Schedule TPSA: Secondary adjustment to transfer price as per section 92CE(2A)
  • Schedule FSI: Details of income from outside India and tax relief
  • Schedule TR: Statement of tax relief claimed under section 90 or section 90A or section 91.
  • Schedule FA: Statement of Foreign Assets and income from any source outside India.
  • Schedule 5A: Information regarding apportionment of income between spouses governed by Portuguese Civil Code
  • Schedule AL: Asset and Liability at the end of the year(applicable where the total income exceeds Rs 50 lakhs)
  • Schedule GST: Information regarding turnover/ Gross receipt reported for GST
  • Part B-TI: Computation of Total Income.
  • Part B-TTI: Computation of tax liability on total income.
  • Verification: Declaration and verification of the accuracy of the information provided in the form.

Taxpayers must fill out each section accurately and comprehensively, providing supporting documents where necessary. As a tax consultant, your expertise in guiding clients through the nuances of these sections is vital for a smooth and error-free filing process.

Navigating the Challenges:

  • Accurate Documentation: Emphasize the importance of maintaining meticulous records of income, expenses, and financial statements to ensure accurate reporting in ITR-3.
  • Adherence to Deadlines: Highlight the significance of adhering to the deadlines set by the Income Tax Department for filing ITR-3. Timely submission can prevent penalties and legal complications.
  • Seeking Professional Guidance: Encourage taxpayers to seek professional advice, especially when dealing with intricate components of ITR-3. Your expertise as a tax consultant plays a pivotal role in guiding them through the process.

 

Frequently Asked Questions on ITR 3 :

Yes, ITR 3 can only be filed electronically through the official income tax e-filing portal.

Yes, you can file late but will be liable for late filing fees. Filing after December 31st of the relevant assessment year may attract even steeper penalties.

 

  • The e-filing acknowledgment is generated.
  • The department verifies the information and may request further documents.
  • Refund (if any) is processed after verification.
  • In case of discrepancies, a tax notice may be issued.

Yes, you can file a revised return within one year of filing the original return.

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