ITR-3 Excel utility: Significant changes introduced for AY 2025-26; check details before ITR filing

The Income Tax Return (ITR) filing process for the Assessment Year (AY) 2025-26 has seen significant updates, particularly in the ITR-3 Excel utility, which is crucial for taxpayers including stock traders. Notable among these changes is the enhanced requirement for disclosing deductions under sections such as 80E and 80EE. 

The ITR-3 form is meant for individuals and Hindu Undivided Families (HUFs) earning income from business or profession that exceeds Rs 50 lakh. For Assessment Year 2025–26, the Income Tax Department has rolled out several key updates to this form.

One major change is in Schedule AL (Assets and Liabilities), where the reporting threshold has been increased from Rs 50 lakh to Rs 1 crore. This means only those with total assets exceeding Rs 1 crore will now need to disclose asset details.

Capital Gains

In Schedule Capital Gains, taxpayers are now required to specify whether the gains were realised before or after July 23, 2024, since different tax rates apply depending on the timing of the sale.

There are also enhanced disclosure requirements under Section 80C, where taxpayers must now provide more granular details of their deduction claims. Additionally, TDS (Tax Deducted at Source) is now to be reported section-wise, bringing more clarity to tax credits.

These changes aim to streamline the filing process and improve compliance for those using ITR-3.

A key update in the ITR-3 utility is the segregation of capital gains reporting. This change mandates taxpayers to report transactions made before and after 23 July 2024 separately, owing to alterations in indexation and tax rules. For transactions involving share buybacks post-1 October 2024, the updated form provides specific guidelines.

"A few important changes are made in ITR-2 and ITR-3 to align with amendments in tax laws made last year’s budget such as for reporting relating to capital gains and share buyback. In case of share buybacks carried out on or after October 1, 2024, the sale consideration should be ‘Nil’ under the capital gains schedule and the actual amount received from buy back will have to be shown as dividend income under ‘Income from Other Sources’ schedule," Gaurav Makhijani, a tax expert at Roedl & Partner India, told the Economic Times. 

The utility also sees updated requirements for taxpayers concerning asset and liability reporting. Taxpayers with a total income exceeding Rs 1 crore, up from the previous Rs 50 lakh threshold, are now required to disclose their assets and liabilities for the financial year. This change aims to reduce compliance burdens while ensuring accurate declarations.

Presumptive taxation

Furthermore, new provisions under Section 44BBC for presumptive taxation related to cruise ship operations are now included in the utility. These provisions simplify the reporting process for specific income categories, enhancing overall compliance. 

For capital assets, resident taxpayers must now provide distinct details on the cost of acquisition and cost of improvement for any properties transferred before 23 July 2024. This adjustment is designed to apply indexation benefits appropriately. Additionally, the form necessitates that taxpayers specify if a capital asset transfer resulting in capital gains occurred before or after the critical date of 23 July 2024, as this determines applicable tax rates. Such detailed reporting ensures that taxpayers can leverage available benefits effectively.

TDS reporting

Finally, the ITR-3 form has expanded the reporting requirements for virtual digital assets, reflecting the increasing importance of such assets in taxpayers' portfolios. Moreover, taxpayers are now required to report Tax Deducted at Source (TDS) under specific sections where taxes have been deducted. These changes underscore the tax authorities' aim to streamline processes and ensure comprehensive compliance from taxpayers across various financial activities. The updates collectively enhance the precision and depth of tax reporting.

Eligible taxpayers can download the ITR-3 Excel Utility, input their information, and then generate a JSON file to upload on the Income Tax e-filing portal.

Taxpayers must now provide comprehensive details like sanction dates and policy numbers to substantiate their claims. Moreover, additional fields have been introduced to capture detailed disclosures under sections like 80C and 10(13A), ensuring greater transparency. These updates aim to streamline the documentation process and enhance the accuracy of tax filings.