New ITR-3 Form: Relief for professionals as asset limit raised to ₹1 crore

CBDT doubles asset reporting limit to ₹1 crore under revised ITR-3 for AY 2025-26 and introduces structured capital gains rules, buyback taxation, and dropdown menus

The Central Board of Direct Taxes (CBDT) has introduced significant revisions to the Income Tax Return (ITR) Form 3 for Assessment Year 2025–26, aiming to streamline compliance for individuals, Hindu Undivided Families (HUFs) and partners in firms or limited liability partnerships (LLPs) who have income from business or profession. The monetary limit for reporting assets and liabilities under Schedule AL has been doubled from ₹50 lakh to ₹1 crore. For AY 2025–26, taxpayers under ITR-3 must file returns by 31 July 2025, unless extended.

 

In the previous Budget announced on 23 July 2024, the government introduced major changes in the taxation of capital gains through the Finance (No. 2) Bill, 2024. The ITR-3 form has been revised to incorporate those changes. Accordingly, taxpayers must now categorise capital gains based on whether they accrued before or after 23 July 2024.

 

Similarly, as per the amendment in Budget 2024, tax on any buyback made after 1 October 2024 will not be applicable in the hands of the company but in the hands of the recipient shareholder on the total amount received from the buyback, as deemed dividend in accordance with the newly inserted provision of Section 2(22)(f). As per the amendment, losses from share buybacks will only be permissible if corresponding dividend income is declared in returns filed after 1 October 2024. This measure aims to curb misuse of losses against dividend income, ensuring tighter compliance.

 

Dropdown menus have been added in ITR-3 for claiming popular deductions like Section 80C (investments in PPF, ELSS, etc.) and for reporting Tax Deducted at Source (TDS) across sections.

 

Sandeep Sehgal, Partner – Tax at AKM Global, emphasised the reforms’ broader impact: “By raising disclosure thresholds and introducing user-friendly features, the CBDT is prioritising ease of compliance while ensuring data accuracy. The capital gains and buyback provisions reflect responsiveness to evolving fiscal policies.”

 

Neeraj Agarwala, Partner, Nangia Andersen LLP, said that the Income Tax Department’s early release of the updated ITR form allows taxpayers sufficient time to assess the reporting requirements and prepare accordingly, thereby minimising the risk of last-minute filing issues.

 

“Notably, the revised Form ITR-3 incorporates legislative amendments from the previous financial year, including distinct disclosures for capital gains arising from asset transfers made before or after 23 July 2024. This structured reporting framework enhances data accuracy and facilitates automated computations within the system, streamlining the return filing process,” Agarwala said.