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September 1, 2020

Major changes and information asked in ITR 3 for AY 2020-21

Major changes and information asked in ITR 3 for AY 2020-21

An income tax return is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. 

Due date for all income-tax return for FY 2019-20 is extended from July 31 2020 and 31 October 31, 2020 to November 30, 2020 to provide relief to taxpayers in view of the current COVID 19 pandemic.

The Central Board of Direct Taxes (CBDT) has notified and released various ITR forms for different purposes. If you file your return using the wrong form, then it will be considered defective.

If the defect is not rectified, the return will be regarded as invalid, and the department will treat it as if the person did not file his return. Hence it is extremely important to know which ITR is applicable for which kind of assessee and for what income.

The taxpayers have to file returns on the basis of the income earned in a financial year and the kind of entity they fall under. Let’s explore in detail the taxpayers who are required to file Form ITR-3 and other relevant instructions pertaining to the same.

What is ITR 3 Form?

ITR 3 is applicable for individual and HUF who have income from profits and gains from business or profession. The persons having income from following sources are eligible to file ITR 3:

  • Carrying on a business or profession (both tax audit and non-audit cases)
  • The return may include income from House property, Salary/Pension, capital gains and Income from other sources

Who is not eligible to File ITR 3?

ITR 3 is not applicable to the following persons:

  • An Individual or HUF who is earning income as a partner of a partnership firm which is engaged in a business/profession is not eligible to file ITR-3.
  • Local Authority, Cooperative Society,  AOP/ BOI or Limited Liability partnership firm  filing ITR 5
  • Trust filing ITR 7

How is one supposed to file ITR 3?

A taxpayer has to compulsorily file ITR-3 online. The ITR-3 can be filed Online/Electronically:

  • By furnishing the return electronically under digital signature (Assessee’s who need to obtain a tax audit must use this method)
  • By conveying the data in ITR-3 form electronically under electronic verification code.
  • By transmitting the data electronically and then submitting the verification of the return in Form ITR-V

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What is the format of ITR 3?

ITR 3 is divided into the following Parts:

  • Part A-GEN: General information and Nature of Business
  • Part A-BS: Balance Sheet of the Proprietary Business or Profession
  • Part A- Manufacturing Account: Manufacturing Account for the financial year
  • Part A- Trading Account: Trading Account for the financial year
  • Part A-P&L: Profit and Loss for the Financial Year
  • Part A-OI: Other Information (mandatory if liable for audit under Section 44AB)
  • Part A-QD: Quantitative Details (mandatory if liable for audit under Section 44AB)

ITR 3 also has the following Schedules:

  • Schedule-S: Details of income from Salaries.
  • Schedule-HP: Details of Income from House Property
  • Schedule BP: Computation of income from business or profession
  • Schedule-DPM: Depreciation on plant and machinery under the Income-tax Act
  • Schedule DOA: Depreciation on other assets under the Income-tax Act
  • Schedule DEP: Summary of depreciation on all the assets under the Income-tax Act
  • Schedule DCG: Deemed capital gains on the sale of depreciable assets
  • Schedule ESR: Expenditure on scientific research (Deduction under section 35, 35CCC or 35CCD)
  • Schedule-CG: Capital gains.
  • Schedule 112A: From sale of equity share in a company or unit of equity oriented fund or unit of a business trust on which STT is paid under section 112A
  • Schedule 115AD(1)(iii) Provision: For Non Residents – From sale of equity share in a company or unit of equity oriented fund or unit of a business trust on which STT is paid under section 112A
  • Schedule-OS: Income from other sources.
  • Schedule-CYLA: Details of income after set off of current year’s losses
  • Schedule BFLA: Details of income after set off of brought forward from earlier years.
  • Schedule CFL: Details of losses to be carried forward to future years.
  • Schedule- UD: Unabsorbed depreciation and allowance under section 35(4)
  • Schedule ICDS – Effect of Income Computation Disclosure Standards on Profit
  • Schedule- 10AA: Deduction under section 10AA.
  • Schedule 80G: Details of donations entitled for deduction under section 80G.
  • Schedule RA: Details of donations to research associations etc. [deduction under sections 35(1)(ii), 35(1)(iia), 35(1)(iii) or 35(2AA)]
  • Schedule- 80IA: Deduction under section 80IA.
  • Schedule- 80IB: Deduction under section 80IB.
  • Schedule- 80IC/ 80-IE: Deduction under section 80IC/ 80-IE.
  • Schedule VIA: Deductions under Chapter VIA.
  • Schedule AMT: Computation of Alternate Minimum Tax Payable under Section 115JC
  • Schedule AMTC: Computation of tax credit under section 115JD
  • Schedule SPI: Income of specified persons (spouse, minor child etc.) includable in income of the assessee as per section 64
  • Schedule SI: Income which is chargeable to tax at special rates
  • Schedule-IF: Information regarding partnership firms in which assessee is a partner.
  • Schedule EI: Details of Exempt Income (Income not to be included in Total Income or not chargeable to tax)
  • Schedule PTI: Pass through income details from a business trust or investment fund as per section 115UA, 115UB
  • Schedule TPSA: Details of Tax on secondary adjustments as per section 92CE(2A)
  • Schedule FSI: Details of income from outside India and tax relief (only for resident)
  • Schedule TR: Summary of tax relief claimed for taxes paid outside India (only for resident)
  • Schedule FA: Details of Foreign Assets and Income from any source outside India
  • Schedule 5A: Information regarding apportionment of income between spouses governed by Portuguese Civil Code
  • Schedule AL: Asset and Liability at the end of the year(applicable where the total income exceeds Rs 50 lakhs)
  • Schedule DI: Details of Investment
  • Schedule GST: Information regarding turnover/ Gross receipt reported for GST
  • Part B-TI: Computation of Total Income.
  • Part B-TTI: Computation of tax liability on total income.

Major changes made in ITR 3 for AY 2020-21

  • A new check point is inserted in basic information, mainly to confirm the applicability of Seventh proviso to section 139(1) i.e. whether a person have deposited more than Rs 1 crore in current bank account or have incurred Rs 2 lakh on foreign travel or Rs 1 lakh on electricity.
  • Under Basic information, In case an individual is a director in a company or holds unlisted equity investments, the ‘type of company’ should also be disclosed.
  • In case of short-term or long term capital gains from sale of land or building or both, the details of the buyer(s) i.e. name, PAN or Aadhaar, percentage share of ownership and address have to be given.
  • There is a new disclosure criteria regarding declaring income under presumptive income scheme
  • There is additional disclosure in Other Information. The following points are added:-
  • Point 11(da) – Any sum payable by the assessee as interest on any loan or borrowing from a deposit taking non-banking financial company or systemically important non-deposit taking nonbanking financial company, in accordance with the terms and conditions of the agreement governing such loan or borrowing
  • Point 17 – Whether assessee is exercising option under section 92CE(2A) (Tick – Yes/ No) [If yes , please fill schedule TPSA]
  • Under Depreciation on Plant and Machinery (Other than assets on which full capital expenditure is allowable as deduction under any other section) – New rate option of 45% is added.
  • Introduction of new Schedule 112A – Details of sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under section 112A
  • Introduced New Schedule 115AD(1)(b)(iii) proviso – For non – residents – Details of sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under section 112A
  • In schedule CFL i.e carry forward of losses, now there is a requirement of bifurcation of loss details in two columns mainly Normal loss and PTI. This specification is required for House Property, Short Term Capital Gains and Long Term Capital Gains.
  • There are some additional disclosures made under schedule PTI, which are as under:
  • Investment entity covered by section 115UA/115UB
  • Bifurcation of Amount as per Current year income, Share of current year loss distributed by Investment fund and Net Income/ Loss
  • New Schedule – TPSA introduced – Details of Tax on secondary adjustments as per section 92CE(2A)
  • New Schedule DI i.e. Details of Investments is inserted. 
  • There is separate disclosure for Bank accounts in case of Non- Residents who are claiming income-tax refund and not having bank account in India. Following details will be required to disclose:
    • SWIFT Code
    • Name of the Bank
    • Country of Location
    • IBAN

How to fill out the verification document?

While filling up the data in the income tax return, a taxpayer should also fill up the verification. One has to furnish all the required information in the verification document. Any person making a false statement in the return or in any of the accompanying schedules shall be liable to be prosecuted under section 277 of the Income-tax Act, 1961 and on conviction be punishable under that section with rigorous imprisonment and with fine.

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