I-T department revises ITR-3 form for AY 2025-26; check key details

The Income Tax Department of India has announced significant amendments to the Income Tax Return (ITR) Form 3 for the assessment year 2025-26, effective from April 1, 2025. These changes have been detailed in Notification No. 41/2025, dated April 30, 2025. The modifications are part of the department's effort to streamline the tax filing process for individuals and Hindu Undivided Families (HUFs) with business or professional income. Notably, the revised form introduces new requirements for reporting, thus aiming to improve compliance under the Finance Act 2024.

The ITR-3 form is designed for individuals and Hindu Undivided Families (HUFs) involved in businesses or professions that necessitate extensive accounting documentation. It caters to individuals and HUFs with income from a sole proprietorship business or profession, such as accountants, doctors, consultants, lawyers, and others who earn income based on realized profits.

Among the key amendments is the introduction of a 1% Tax Deducted at Source (TDS) rate under Section 194Q, specifically for e-commerce operators whose business income exceeds Rs 5 crore. This measure aligns with India's broader strategy to enhance tax transparency and compliance. Additionally, the revised form mandates the capturing of TDS details under Section 194R for any benefits or perquisites received. Another significant update is the requirement for taxpayers to report foreign assets and income in Schedule FA. This change underscores the government's focus on transparency in cross-border financial transactions. 

The Income Tax Department has also made provisions for taxpayers to opt for the old tax regime by filing Form-10-IEA, despite the new tax regime being the default since the assessment year 2024-25. This gives taxpayers flexibility in choosing their preferred tax regime.

Furthermore, a rationalised holding period in Schedule CG for capital gains reporting has been introduced, alongside a new column to report Short-Term Capital Gains (STCG) under Section 50, specifically related to depreciable assets. This aims to simplify the capital gains reporting process for taxpayers, ensuring clarity and ease of filing. 

To assist taxpayers in understanding and navigating these changes, the Income Tax Department has released an explainer series available on its official website. These resources are designed to provide comprehensive guidance on the new filing requirements and help taxpayers comply with the updated regulations effectively. The department's focus on providing additional resources reflects its commitment to facilitating a smoother filing experience and enhancing taxpayer awareness about the amendments.

The amendments to ITR-3 are expected to provide a more structured framework for reporting various income streams, particularly for those involved in e-commerce and international transactions.