ITR-3 updated: What biz owners, professionals must know for FY25 tax filing

If you're an individual or part of a Hindu Undivided Family (HUF) earning income from a business or profession, it's time to get familiar with the newly notified ITR-3 form for Assessment Year 2025–26.

 

The Income Tax Department has made key changes to the form, aiming to simplify tax filing and reduce unnecessary disclosures—especially for middle-income taxpayers. Here's what you need to know if you fall in this category.

 

What’s New in ITR Form 3 (AY 2025–26)?

• Who should file it?
• ITR-3 is meant for individuals and Hindu Undivided Families (HUFs) who earn income from business or profession.
• Those not eligible to file simpler forms like ITR-1 or ITR-4
• If you're a freelancer, doctor, lawyer, consultant, or have any kind of business income, this form is for you.

 

Key Changes and Highlights:

• Increased Threshold for Asset & Liability Disclosure:
• Earlier, you had to report assets and liabilities if your total income exceeded Rs 50 lakh.
• Now, the threshold has been increased to Rs 1 crore, reducing the disclosure burden for many middle-income taxpayers.

 

What this means for you?

• Relief for Middle-Income Taxpayers:
• You no longer need to report your assets and liabilities in Schedule AL unless your total income exceeds Rs 1 crore (previously ₹50 lakh).This significantly reduces paperwork for professionals and business owners in the middle-income bracket.

 

Split Reporting of Capital Gains:

• If you sold real estate or any other long-term capital asset, you now need to separately report gains made before and after July 23, 2024.
• This change reflects the Budget 2024 update, which introduced:
• A 12.5% LTCG tax without indexation (for sales after July 23)
• OR, the traditional 20% LTCG tax with indexation
• Taxpayers who purchased real estate before July 23, 2024, can choose the option that benefits them the most.
• This gives more flexibility to taxpayers based on when they bought/sold the property.

 

Ease of Deductions:

• Dropdown menus for deductions like Section 80C, 80GG, and others have been added.
• This makes it easier and more transparent when claiming deductions.

 

Section-Wise TDS Reporting:

Taxpayers now have to report Tax Deducted at Source (TDS) in more detail, section by section, improving clarity for both the filer and the tax department.

 

Why these changes matter:

According to Sandeep Sehgal, Partner – Tax at AKM Global:

 

“These updates simplify compliance for business owners and professionals. Dropdowns for deductions and section-wise TDS reporting enhance transparency and accuracy.”

 

The changes are also aligned with efforts to make tax filing more user-friendly, and better synced with emerging tax policies like the new LTCG structure.

 

 Budget 2024 Impact: What you should keep in mind

• Selling real estate? You now have a choice: pay lower tax (12.5%) without indexation, or claim inflation-adjusted costs and pay 20%.
• Gains before July 23, 2024, still fall under the old regime.
• Make sure to keep sale documents, cost details, and timelines handy for accurate reporting.

 

For professionals, freelancers, and small business owners, the new ITR-3 form brings:

• Less disclosure if your income is below  Rs 1 crore
• More clarity and control over capital gains tax
• Streamlined deduction claims
• But it also comes with new reporting responsibilities, especially for capital gains and TDS.

 

As the filing window for FY 2024–25 (AY 2025–26) opens, it’s wise to get organized early. Keep your income records, expense proofs, investment documents, and capital asset sale details ready—and consult a tax advisor if you’re unsure which LTCG option suits you best.  With inputs from PTI