ITR 3: Benefits, eligibility, important dates and application process; all you need to know

ITR-3 allows you to carry forward losses from a bad year and offset them against future profits, lowering your overall tax burden.

The last day to file your ITR 3 form is July 31, 2024. (Source: Freepik)

Filing the ITR (Income Tax Return) is important if your annual income comes under the tax slab. Moreover, failing to submit your ITR by the given deadline can also end up landing you in legal trouble. Filing an ITR can be a complex task, given the fact that there are several different types of ITR forms available based on your source of income. One such type of ITR is ITR 3, for individuals whose income is generated from running a sole proprietorship or practising a profession independently. The process of filing ITR 3 is almost identical to all the other forms, with a few minor differences, which we will discuss in more detail in this article while assisting you with the entire process simultaneously.

What is the ITR 3 form?

Individuals and Hindu Undivided Families (HUFs) can file their income tax returns using ITR-3, but there are specific criteria to meet. The main purpose of ITR-3 is for those with income from running a business or practising a profession (doctors, lawyers, etc.).
However, ITR-3 is also applicable even if you have salary, pension, or other income sources alongside your business or professional income. It’s important to note that this form is not suitable for partners in a firm (business or professional). They need to use a different ITR form. Additionally, if you had investments in unlisted equity shares during the year, filing ITR-3 becomes mandatory.

ITR 3: Benefits

Filing your ITR-3 on time and accurately can bring you several benefits. For one, it acts as a formal record of your income, making it easier to get loans approved by banks and other financial institutions. Similarly, many countries require proof of income for visa applications, and a filed ITR-3 can serve this purpose.
But the advantages go beyond paperwork. Filing your return ensures you receive any tax refunds you may be entitled to if you’ve overpaid during the year. For businesses, ITR-3 allows you to carry forward losses from a bad year and offset them against future profits, lowering your overall tax burden. Finally, consistent ITR filing reduces the likelihood of your tax return being chosen for a detailed examination by the tax department.

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ITR 3: Eligibility

Filing your income tax return in India can be confusing, but figuring out if ITR-3 is the right form for you is a breeze. This checklist cuts through the complexity:

Business or Freelance Income: Are you a business owner (sole proprietorship or proprietorship firm) or an independent professional like a doctor, lawyer, or chartered accountant? If you run your own business or practice a profession independently, then ITR-3 applies.
Mixed Income Sources: Don’t worry if you also have a salary, pension, or other income sources. ITR-3 accommodates those as well, as long as you have a business or professional income.
Unlisted Share Investments: Did you invest in any unlisted shares during the past year? If so, ITR-3 becomes mandatory for filing your return.

ITR 3: Required documents

Before embarking on the ITR-3 filing process, ensure you have the following documents available:

PAN Card (of yourself and HUF, if applicable)
Aadhaar Card
Form 16 (from employers)
Bank statements showing interest income
Investment proofs (mutual funds, stocks)
Business income and expenditure details
Details of deductions claimed (medical bills, donations, etc.)

ITR 3: Step-wise guide

The Income Tax Department encourages electronic filing of ITR-3. Here’s a step-by-step guide:

Register/Login: Visit the Income Tax Department’s e-filing portal (https://www.incometax.gov.in/iec/foportal/) and register or log in using your PAN details.
Select ITR Form: Choose “ITR-3” for the relevant Assessment Year (AY).
Fill in Details: Carefully enter your personal details, income details from various sources, deductions claimed, and tax calculations.
Upload Documents: Upload scanned copies of the aforementioned documents as required.
Verification: After reviewing all details, electronically verify the return using a digital signature or Aadhaar OTP. Alternatively, you can generate Form ITR-V, print it, sign it, and mail it to the CPC within 120 days.

ITR 3: Important dates to remember

The deadline for filing ITR-3 depends on whether you owe taxes or not. For most people, there are two deadlines to keep in mind:

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Refund or No Tax Liability: If you don’t owe any taxes or expect a refund, the deadline to file ITR-3 is typically July 31st of the assessment year. This gives you more flexibility with filing, allowing you to potentially wait for any income statements or receipts you might need.
Tax Liability: However, if you owe taxes after filing your ITR-3, the deadline to pay those taxes becomes December 31st of the assessment year. This gives you some extra time to gather the funds for your tax payment.