Filing your income tax return doesn’t have to feel like rocket science. With the Income Tax Department officially activating the online filing utility for ITR-3 on its e-filing portal, it’s time for taxpayers to gear up for the assessment year 2025–26. But here’s the catch: before you jump in, you need to be absolutely sure you are using the right form.
In this detailed guide, we’ll walk you through everything you need to know about ITR-3 filing, including eligibility criteria, the latest rule changes, how it differs from ITR-4, and key deadlines—explained in plain language.
What Is ITR-3 and Who Can Use It?
Think of ITR-3 as a specialized form created for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession. Whether you’re running a consultancy, managing a small firm, or earning from a partnership, this is the form for you.
Here’s what the Income Tax Department says:
“ITR-3 can be filed by individuals or HUFs who have income from profits and gains of business or profession (including audit and non-audit cases) along with salary, pension, capital gains, or partnership remuneration.”
In simple terms, if you have a mix of business income and other income like salary or capital gains, ITR-3 is your go-to option.
Who Cannot File ITR-3?
Not everyone can use this form. If you don’t have business or professional income, you should not file ITR-3. Instead, you may need to consider ITR-1, ITR-2, or ITR-4, depending on your income sources.
The Income Tax Department clearly states:
“Form ITR-3 cannot be used by any person other than an individual or a HUF. Further, an individual or HUF not having income from business or profession cannot use ITR-3.”
Snapshot of ITR-3 for AY 2025–26
| Aspect | Details |
|---|---|
| Form Availability | ITR-3 is live on the e-filing portal. |
| Who Can File | Individuals and HUFs with income from business/profession, salary, pension, capital gains, or partnership. |
| Who Cannot File | Individuals/HUFs without business or professional income. |
| Key Changes | Schedule AL threshold raised; capital gains split based on July 23, 2024; detailed deductions reporting introduced. |
| Capital Gains Tax | LTCG on house purchases before July 23, 2024: 12.5% without indexation OR 20% with indexation. |
| Due Dates | Non-audit: Sept 15, 2025; Audit: Oct 31, 2025 |
Key Changes in ITR-3 for AY 2025–26
The Income Tax Department has introduced several taxpayer-friendly changes this year. Let’s break them down:
1. Higher Threshold for Schedule AL
Previously, taxpayers had to report assets and liabilities if they exceeded ₹50 lakh. Now, that threshold has been doubled to ₹1 crore!
This change significantly reduces the compliance burden for middle-income taxpayers.
2. Capital Gains Split After July 23, 2024
Here’s where things get interesting. Capital gains now need to be reported separately based on whether they were realized before or after July 23, 2024.
Why? Because Budget 2024 changed the way capital gains are taxed.
For example:
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If you bought a house before July 23, 2024, you can choose:
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12.5% LTCG tax without indexation, OR
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20% LTCG tax with indexation.
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Similarly, long-term capital gains (LTCG) rates for equity mutual funds and shares have been revised, meaning more precise reporting is required.
3. Detailed Deduction Reporting
Gone are the days of lump-sum deduction entries. Now, ITR-3 includes dropdown menus for section-wise deduction reporting.
Here’s what you’ll need to provide details for:
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Section 80C (Investments like PPF, ELSS, LIC, etc.)
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Section 80E (Education loan)
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Section 80EEA/80EE/80EEB (Home loan, electric vehicle loan benefits)
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Section 10(13A) (House Rent Allowance)
This ensures better transparency—and yes, a bit more effort while filing.
4. Simplified Dropdown Selections
ITR-3 now uses dropdown menus to reduce errors in deduction claims. Instead of manually entering codes, you simply pick from a list. This not only saves time but also minimizes rejection chances.
How ITR-3 Differs From ITR-4
Many taxpayers get confused between ITR-3 and ITR-4. Here’s a clear distinction:
| ITR-3 | ITR-4 |
|---|---|
| For individuals/HUFs with business or professional income (audit/non-audit). | For resident individuals/HUFs/firms (not LLPs) with income up to ₹50 lakh under presumptive taxation. |
| Detailed capital gains and deductions reporting required. | Limited reporting under presumptive income. |
| No presumptive taxation option. | Covers Sections 44AD, 44ADA, and 44AE for presumptive income. |
| Suitable for freelancers, consultants, and businesses. | Suitable for small businesses and professionals under presumptive taxation. |
Eligibility Highlights for ITR-4 (For Comparison)
While our focus is ITR-3, it’s useful to know ITR-4’s limits:
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Presumptive income under Sections 44AD, 44ADA, 44AE.
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LTCG must be ≤ ₹1.25 lakh under Section 112A.
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Income from salary, one house property, and agricultural income (≤ ₹5,000) allowed.
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Other income sources like savings interest allowed (but no lottery or racehorse income).
If you exceed these, you’ll need ITR-3.
Deadlines for ITR-3 Filing (AY 2025–26)
Mark your calendar:
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September 15, 2025 → Non-audit cases.
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October 31, 2025 → Audit cases.
Filing early is smart—it helps avoid last-minute errors and interest penalties.
Why Schedule AL Changes Matter
Raising the threshold for asset-liability reporting from ₹50 lakh to ₹1 crore isn’t just a number—it’s a relief for millions of taxpayers.
Previously, even middle-class professionals with a modest mix of real estate and savings got pulled into this reporting requirement. Now, only high-net-worth individuals with significant assets need to worry.
LTCG Reporting: What It Means for You
The split reporting of capital gains before and after July 23, 2024, reflects how income tax rules adapt to budgetary changes.
Example:
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Raj bought a house in May 2024 and sold it in Feb 2025. He can now choose between two LTCG rates (12.5% or 20% with indexation).
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Priya invested in equity mutual funds in 2023 and redeemed in Aug 2024. She must report gains under the new post-July 23 tax rules.
This extra layer of detail ensures accuracy but demands close attention.
Practical Tips for ITR-3 Filers
Filing ITR-3 isn’t just about punching in numbers. Here’s how to make it stress-free:
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Keep your documents ready: Balance sheets, profit & loss statements, and deduction proofs.
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Verify capital gains details: Check purchase/sale dates and applicable tax rates.
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Double-check deduction claims: Especially under Sections 80C and 80EE.
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Use the e-filing utility smartly: Dropdowns reduce errors—use them.
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File early: Avoid the rush near deadlines.
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Conclusion
Filing your income tax return with ITR-3 might feel overwhelming at first, but the updated utility for AY 2025–26 actually makes life simpler. With clearer deduction breakdowns, higher thresholds for asset reporting, and better guidance on capital gains, this year’s process is more transparent than ever.
So, whether you’re a consultant, small business owner, or professional earning partnership income—filing ITR-3 correctly ensures peace of mind and avoids unnecessary tax hassles.
Bottom line? File early, stay compliant, and let the new ITR-3 utility work in your favor.
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