Income Tax Taxation

All you need to know about ITR-3 Filing

ITR or Income Tax Return is where taxpayers file information about the income earned & tax applicable to the IT Department. It has notified 7 forms to file an ITR categorically. These forms are ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. This article is describing ITR-3 Filing.

The applicability of these forms depends on the income source, the taxpayer’s category, and the amount of income.

ITR- 3 filing is done by the taxpayer when the income source is their own business and will not be applicable when the taxpayer is a partner in a firm.

This article will focus on ITR- 3 filing, its process, and significant changes made during 2020-21.

What is ITR- 3 filing?

ITR- 3 filing is done by an individual or Hindu Undivided Family whose income comes from their proprietary business or is carrying on profession.

The individuals having income from the following sources are eligible for ITR- 3 filing:

• Individual director of the company;
• Carrying on business or profession;
• If an investment in unlisted equity shares is made during the financial year; and
• It may include the income from salary or pension, House property & income from other sources.

Individuals not eligible for ITR- 3 filing:

• An individual or HUF who is a partner in a partnership firm and is earning for that is not eligible for ITR- 3 filing.

In the case mentioned above, he can file ITR 2.

What is the structure of ITR- 3?

The structure of the ITR 3 form is divided into 2 parts and 23 schedules. ITR 3 is divided into the following parts:

• Part A
  1. Part A- Gen: General information & the nature of business of the taxpayer.
  2. Part A- BS: Balance sheet of the business or profession for the financial year.
  3. Part A- P&L: Profit & Loss statement of business for the FY.
  4. Part A- OI: Other Information.
  5. Part A- QD: Quantitative details.
• Part B
  1. Total income & the tax computation on the net income chargeable for the tax.
  2. Tax Payments: It contains details of advance tax, TDS, etc.
• Verification
• Schedules
  1. It contains various schedules related to computation of income from house property, salary, business or profession, depreciation on sale of various assets, income from other sources, deductions under the provisions of IT Act, 1961^[1], etc.

How to do ITR- 3 filing?

An ITR- 3 filing can be done online and offline. The government advises the taxpayers to choose the online option to file ITR- 3. However, there are exclusive cases where offline ITR-3 filing is permitted.

Both the modes are discussed below:

• Online method

The steps for online ITS-3 filing are:

1. Visit the e-filing portal of the Income Tax department.
2. Login using the credentials.
3. Click on the form ITR-3 and fill it.
   • If the digital signature is available, then the verification can be done through it. The acknowledgement will be sent to the registered email id or can be downloaded manually through the website.
   • If the digital signature is not available, then verification can be done through ITR V (Income Tax Return verification form) sent by the IT department after the completion of the form. The ITR V is to be filled & signed, and sent back to the IT department’s official address within 120 days.
4. The individuals are required to submit the duly completed form to the Income Tax Department’s CPC office in Bangalore within 10 days of e-filing or e-verify.

• Offline method

The following taxpayers are eligible for offline ITR-3 filing:

1. If an individual is a super citizen, i.e., 80 years or more; and
2. If income is lower than Rs. 5 lakhs.

In case an individual is eligible for offline ITR-3 filing, you can submit it in 2 forms:

• Bar-coded or
• Paper.

Steps to fill the form offline

1. Visit the official website of the Income-tax department.
2. Download the form.
3. Fill it and submit it.

Major changes in the ITR-3 filing form for AY 2020-21

• The taxpayer must disclose:
  1. Expenditures above Rs. 2 lakhs on foreign travel;
  2. Expenditures above Rs. 1 lakh on electricity; and
  3. Amount of cash deposits above Rs. 1 crore in the current accounts of the bank.
• The company’s type must be disclosed when the individual is a director in a company or holds unlisted equal investments.
• The buyer’s details to be given in the short term or long term capital gains from the sale of land or building, or both.
• Schedule 112A was inserted to calculate the long-term capital gains from the sale of equity shares, liable to STT (Securities Transaction Tax).
• The taxpayer must provide the details of any other income in case of income from other sources.
• The details of deductions against the income from other sources should also be given.
•  The details of capital gains & dividend income should be provided in business trust or investment funds.
• The amendment in Schedule VI-A was made to include deductions under Section 80EEA & 80EEB.
• The details of tax deduction claims for payments or investments or expenditure made from 1^st April 2020 until 30^th June 2020.
• If the taxpayer selects multiple bank accounts for credit refunds, then the IT department may choose any account for the process of refund.

Conclusion

ITR-3 filing is done by an individual or Hindu Undivided Family whose income comes from their proprietary business or is carrying on profession.

An ITR- 3 filing can be done online and offline. The government advises the taxpayers to choose the online option to file ITR- 3. However, there are exclusive cases where offline ITR-3 filing is permitted.

Thus, the taxpayer who is eligible for ITR-3 filing must follow the procedure laid while filing.

Read our article:Read about the Penalty for Late Filing of ITR