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July 31, 2020

ITR 3 is available for E filing for AY 2020-21 Know to whom it is applicable & Changes?

ITR 3 is available for E filing for AY 2020-21 FY 2019-20 Know to whom it is applicable and Changes?

ITR Utility Software introduces by the Income Tax Department, the ITR utility helps a taxpayer to file Income Tax Return easily. Income Tax Department releases an updated version of the ITR Utility software for online filing of Income Tax Return every year.

Today the income tax department has notified ITR 3 utility. ITR – 3 can be used by an individual or a Hindu Undivided Family who is having income from profits and gains of business or profession or individual or HUF covered under section 44AB of the Income tax act i.e. tax audit. In this article we will know about ITR 3 utility.

To whom ITR3 is applicable?

The 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:

a. Carrying on a business or profession (both tax audit and non-audit cases)

b. The return may include income from House property, Salary/Pension, capital gains and Income from other sources

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Who cannot file ITR 3?

ITR 3 is not applicable to the following persons:

a. Individual having income other than Income from business and filing ITR 2 or ITR 1

b. Company who are filing 6

c. Partnership firm filing ITR 5

d. Limited Liability partnership firm filing ITR 5

e. AOP/ BOI filing ITR 5

f. Cooperative Society filing ITR 5

g. Trust filing ITR 7

h. Local Authority filing ITR 5

What is the due date to file ITR 3?

The due date for filing ITR-3 in case of a taxpayer subject to tax  or person not liable tax audit has been extended to 30 November from 31 October for the AY 2020-21 (FY 2019-20). The due date for filing tax audit report is extended to 31 October from 30 September. (2) The threshold limit of Rs 1 crore for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.

What are the documents required for filing ITR 3?

In case of person filing ITR 3 the below documents are required:

  1. Aadhaar card copy.
  2. Form 16 issued by employer in case salary income is earned.
  3. Month wise salary slip where form 16 is not been issued by the employer in case salary income is earned.
  4. Rent receipts in case of rental income and rental agreement.
  5. Bank statement for the financial year for interest on savings account.
  6. Form 16A or Interest Statement issued by Banks for Fixed Deposit Interest Income.
  7. In case of capital gains, tax profit and loss or capital gain statement issued by the Share broker.
  8. Chapter VIA Investment details for claiming deduction as follows:
  9. Receipt of children’s school tuition fees.
  10. Life insurance premium receipt.
  11. Stamp-duty and registration charges.
  12. Principal repayment on your home loan.
  13. Equity Linked Savings Scheme/Mutual funds investment.
  14. Mediclaim payment receipt etc.
  15. Profit and loss statement and Balancesheet for the previous year
  16. Details of Chartered Accountant conducting Tax audit in case the person is covered under section 44AB.
  17. Copies of books of accounts required to be maintained as per section 44AB i.e. Cash book, Journal book, Sales and Purchase register in case of business and Receipt book in case of profession.

Major changes made in ITR 3 for AY 2020-21

The Income tax department has made the following major changes in ITR 3:

a. Assesee is required to report cash receipts or payment where the turnover is between Rs.1 crore to Rs. 5 Crore

Until AY 2019-20, every assessee, carrying on business, was required to get its books of account audited from a Practicing Chartered Accountant where its total sales, turnover or gross receipt from the business exceeds Rs. 1 crore during the previous year.

In order to reduce the compliance burden on the small and medium enterprises, the Finance Act, 2020 has increased the threshold limit of turnover under section 44AB for audit. From AY 2020-21, the threshold limit for the Tax audit, for person carrying on business, is increased from Rs. 1 crore to Rs. 5 crores. However, the increased limit of Rs. 5 crores shall be applicable only where the cash receipts and cash payments during the year does not exceed 5% of total receipt or payment, as the case may be.

In order to incorporate the above amendments, the department has amended the ITR forms where the assessee is required to tick the check-box if cash receipts or cash payments exceed 5%. In case the assessee selects ’Yes’, then he will be liable to tax audit under Section 44AB.

b. Addition of 45% rate of depreciation in the block of plant and machinery

Until AY 2019-20, there were 3 blocks available to calculate depreciation on the plant and machinery, i.e. 15%, 30% and 40%.

In order to boost the demand for motor vehicles, the Finance Minister has announced an additional depreciation of 15% on motor vehicles purchased between 23-08-2019 and 31-03-2020. This announcement was made on 23-08-2019 as part of a stimulus package. The new depreciation rates were notified by the CBDT vide Notification No. 69/2019, dated 20-09-2019 with retrospective effect from 23-08-2019.  As per new Appendix I, the rates of depreciation on the motor vehicles shall be as under:

Nature of motor vehicleRate of depreciation
Motor cars (other than those used in a business of running them on hire)15%
Motor cars (other than those used in a business of running them on hire) acquired between 23-O8-2O19 and 31-03-2O2O and is put to use on or before 31-OF-202030%
Motor buses, motor lorries and motor taxis used in a business of running them on hire30%
Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired between 23-08-2019 and 31-O3-2020 and is put to use on or before 31-03-202045%

As there is no 45% existing rate of depreciation, the relevant columns and depreciation schedule have been modified to allow computation of depreciation at the rate of 45%.

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