The Central Board of Direct Taxes (CBDT) has notified Income Tax Return Form 3 (ITR-3) for Assessment Year 2025-26, applicable for income earned in the financial year 2024-25. Form ITR-3 applies to individuals and Hindu Undivided Family (HUF) earning income from profits and gains of business or professionals like doctors, lawyers, consultants or freelancers.
On April 29, the income tax department had notified ITR-1 and ITR-4 forms for AY 2025-26, and made it easier for individuals with long-term capital gains (LTCG) of up to Rs 1.25 lakh from listed equities to file returns.
The income-tax department has made significant changes in ITR3. The threshold for reporting assets and liabilities (under Schedule AL) has been raised from ₹50 lakh to ₹1 crore, reducing the disclosure burden on middle-income taxpayers.
The capital gains will have to be split based on whether they arose before or after July 23, 2024. If shares or units of equity-oriented mutual funds were sold before July 23, 2024, long-term capital gains (LTCG) tax will be levied at 10% on gains above Rs 1 lakh in a financial year. If sold after July 23, 2024 it will be taxed at 12.5% on gains above Rs 1.25 lakh in a financial year.
Losses from share buybacks are allowed only if related dividend income is reported post-October 1, 2024. A new part in Schedule Capital Gains has been introduced in the form to separately report gains before and after July 23, 2024, following changes in the Finance Act 2024.
The form has also put the option for individuals or HUFs who have acquired properties before July 23, 2024, to choose between two options: either pay long-term capital gains (LTCG) tax at 12.5% without indexation or continue with the existing system of 20% LTCG tax with indexation benefits.
Similarly, dropdowns for deductions like Section 80C and section-wise TDS reporting have also been introduced for ease of filing. The form requires granular details for deductions such as investments under 80C and house rent allowance.
“These changes reflect the CBDT’s ongoing efforts to promote ease of compliance, improve data accuracy, and align reporting with emerging policy developments,” says Sandeep Sehgal, partner, Tax, AKM Global, a tax and consulting firm.
Under the TDS Section, the format mandates disclosure of the TDS section code (e.g., 194A, 194H, etc.) in the Schedule-TDS. “These targeted enhancements reflect a continued push towards greater clarity, ease of compliance, and data-driven accuracy in the return filing process,” says Neeraj Agarwala, partner, Nangia Andersen LLP.
The last date for filing ITRs that do not require an audit is July 31 and October 31 for those who require an audit.