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What is ITR 3 Filing?
In the realm of income tax compliance, ITR-3 shines as a crucial document. Specifically designed for individuals and Hindu Undivided Families (HUFs) earning income from businesses or professions, the Income Tax Return Form 3 (ITR-3) serves as the linchpin of financial transparency.
It empowers taxpayers to accurately declare their income sources, compute taxable income, and determine their tax liability, aligning them with tax regulations and contributing to the nation’s fiscal well-being.
This form captures intricate financial details and ensures tax compliance, making it indispensable for those navigating the world of business and professional income. In the sections that follow, we’ll provide insights into ITR-3’s significance, ITR 3 applicability, document requirements, structure, filing instructions, and the latest updates for the fiscal year 2022-23.
Documents Required to File ITR 3
✔ PAN (Permanent Account Number)
Your PAN is a unique identifier that you’ll need to include in your ITR-3. It’s crucial for the verification of your identity and tax-related transactions.
✔ Aadhaar Card
Your Aadhaar card serves as an essential document for identity verification, and it’s required for ITR-3 filing. Ensure that your Aadhaar details are accurate and up to date.
✔ Bank Account Details
You’ll need your bank account details, including your account number and IFSC code, to facilitate tax refunds and other financial transactions.
✔ Form 16 (if applicable)
If you are a salaried individual, your Form 16 is a crucial document. It provides a summary of your earnings, deductions, and TDS (Tax Deducted at Source) details
✔ Details of Your Investments
Compile information about your investments, such as Fixed Deposits, Mutual Funds, and other financial instruments.
✔ Books of Accounts
(if applicable):
If you have income from a business or profession, maintaining books of accounts is a legal requirement.
ITR 3 Filing Charges
| Basic | Essential | Advanced |
|---|---|---|
|
₹ 4000 |
₹ 7000 |
₹ 11000 |
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Who Can File ITR 3?
Understand ITR 3 applicability and eligibility
ITR 3, or the Income Tax Return Form 3, is a specific tax filing document tailored for individuals and Hindu Undivided Families (HUFs) with certain financial characteristics and activities.
Here’s a listicle explaining who can file IT:R 3 and its applicability
✔ Directorship in a Company or Business Engagement: If you are a director in a company or actively engaged in a business, you are eligible to use ITR-3 for income tax return filing.
✔ Residential Status: ITR-3 can be utilized by taxpayers with either resident or non-resident status in India. It covers a broad spectrum of residential statuses.
✔ Pension Income: Individuals and HUFs receiving income from a pension source can file their tax returns using ITR-3.
✔ House Property Income: Income from house property is one of the criteria for ITR-3 eligibility. If you earn income from house property, this form applies to you.
✔ Investments in Unlisted Equity Shares: Taxpayers with investments in unlisted equity shares are also eligible to file their income tax returns using ITR-3.
✔ Income Under ‘Profits and Gains of Business or Profession’: If your income primarily falls under the category of ‘profits and gains of business or profession,’ which includes various income elements like salary, interest, commission, bonus, or remuneration, ITR-3 is the form for you.
✔ Additional Income Sources: ITR-3 is suitable for individuals and HUFs with various income sources, including:
- Income from a single-house property or multiple-house property.
- Income from activities such as lotteries, betting on races, and other legal forms of gambling following Indian law.
- Income from short-term or long-term capital gains.
- Income earned from a business or profession conducted under a proprietorship firm owned by the individual or a HUF.
- Income earned from foreign assets.
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Benefits of ITR 3 Filing
01.
Claiming Deductions
By filing ITR 3, you can claim various deductions and exemptions available under the tax laws. This can significantly reduce your taxable income and, consequently, your tax liability.
02.
Carry-Forward of Losses
If you have incurred losses in your business or profession, filing ITR 3 allows you to carry forward these losses for set-off against future profits. This can help in reducing your tax liability in future years.
03.
Credit Verification
Filing ITR is often a requirement for loan applications, visas, and other financial transactions. It serves as proof of your financial stability and credibility.
04.
Avoiding Penalties
Timely filing of ITR 3 can help you avoid penalties and interest on any tax dues. It is essential to file your return within the due date to prevent these additional financial burdens.
05.
Financial Planning
The process of preparing for tax filing encourages you to review your financial situation, income sources, and expenses. This can be valuable for better financial planning and budgeting.
06.
GST Compliance
For businesses registered under GST, ITR 3 filing is crucial as it provides a reconciliation of GST returns and income tax returns, ensuring compliance with the Goods and Services Tax regime.
07.
Proof of Income
Your ITR 3 serves as legal proof of your income. This is often required for various purposes, including applying for visas, loans, or even renting a property.
08.
Reduced Scrutiny
Filing ITR 3 with accurate information can reduce the likelihood of being selected for a tax audit or scrutiny by tax authorities.
What are the Key Changes in ITR 3 for FY 2022-23 (AY 2023-24)?
The ITR-3 form for the Assessment Year 2023-24 has seen notable changes to accommodate evolving financial landscapes.
Here’s a list of the significant updates:
✔ Introduction of Schedule VDA: A new “Schedule VDA” has been introduced to separately report income from Virtual Digital Assets (VDAs), including cryptocurrencies. If you classify income from VDAs as capital gains, you’ll need to provide a quarterly breakdown under the Capital Gains Schedule. The form now mandates the reporting of each VDA transaction, complete with sale and purchase dates.
✔ Questions on Opting Out of New Tax Regime: The latest ITR-3 form includes additional questions aimed at determining whether you had previously opted out of the New Tax Regime in prior years. This is essential for assessing your tax obligations accurately.
✔ SEBI Registration Number for Foreign Institutional Investors (FII/FPI): Foreign Institutional Investors (FII/FPI) are required to provide their SEBI registration number as an additional disclosure measure. This step enhances transparency and regulatory compliance in financial dealings.
✔ Adjustments in Balance Sheet Reporting: There’s been a subtle modification in the reporting of balance sheets. According to the new ITR-3 form, advances received from individuals specified in Sec 40A(2)(b) of the Income Tax Act and others must be categorized under the ‘Advances’ heading in the Source of Funds section. This ensures precise representation of financial transactions.
✔ Reporting Turnover and Intraday Trading Income: The latest ITR-3 form includes a new section for reporting turnover and income from intraday trading. This dedicated section ensures that income generated through intraday trading is accurately documented, improving transparency and compliance.
These changes in the ITR-3 form for AY 2023-24 reflect the tax authorities’ efforts to adapt to evolving financial landscapes and enhance the accuracy and comprehensiveness of income tax reporting. Taxpayers must be aware of these updates to ensure accurate and compliant filing.
Not Eligible for ITR 3
An important note: If you are an individual or HUF earning income as a partner in a partnership firm involved in a business or profession, ITR 3 does not apply to you. In such cases, you should consider filing your returns using ITR-2.
Understanding the eligibility criteria for ITR-3 empowers individuals and HUFs to make informed choices when filing their income tax returns, ensuring compliance with tax regulations and maximizing tax-saving opportunities.
Important Dates and Penalty for Late Filing of ITR 3
Filing your Income Tax Return Form 3 (ITR-3) requires careful attention to deadlines and potential penalties.
Here’s a listicle to help you understand the due dates and late filing penalties:
✔ What is the Due Date for ITR 3 Return Filing?
For Assessment Year 2023-24, the due date for filing ITR-3 depends on whether your case falls under the audit category or not:
- Non-audit Cases: The due date is July 31, 2023.
- Audit Cases: The due date is October 31, 2023.
Keep in mind that these dates are subject to change, so it’s crucial to stay informed about any updates or extensions by the income tax authorities.
✔ What are Late Filing Penalties for ITR 3 Return Filing?
Late filing of your ITR-3 can result in penalties. Here’s what you need to know:
- Filing After the Due Date but Before December 31 of the Assessment Year: A late filing fee of ₹ 5,000 may be imposed.
- Filing After December 31 of the Assessment Year: A late filing fee of ₹ 10,000 may be levied.
It’s worth noting that the late filing fee can vary based on factors such as your total income.
If your total income is less than ₹ 5 lakh, the maximum late filing fee is capped at ₹ 1,000.
To avoid these penalties and potential legal consequences, it’s advisable to file your ITR-3 on time, adhering to the prescribed due dates.
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