ITR-3 form simplified for AY 2025-26: Taxpayers with business income, capital gains split must note new rules

The Central Board of Direct Taxes (CBDT) has officially notified the ITR-3 form for the assessment year 2025–26. This form is meant for individuals and Hindu Undivided Families (HUFs) who have income from business or profession, and it is used to report income earned during the financial year 2024–25 (April 1, 2024, to March 31, 2025).

According to a post by the Income Tax Department on X, the ITR-3 has been further simplified for ease of filing. A key update includes a new schedule for reporting capital gains — allowing taxpayers to separately disclose gains accrued before and after July 23, 2024. This split aligns with the provisions introduced in the Finance Act, 2024, and ensures accurate calculation of tax liabilities under the revised rules.

The ITR-3 form will also enable taxpayers to report capital losses on share buybacks, provided that the associated dividend income is declared as income from other sources, as per the amendment that took effect on October 1, 2024.

In a social media post, CBDT notified ITR-Form 3 for AY 2025-26, which included key updates: 

> Schedule-Capital Gain split for gains before/ after 23.07.2024 (post changes in Finance Act, 2024)
> Capital loss on share buyback allowed if corresponding dividend income is shown as income from other sources (post 01.10.2024)
> Asset & liability reporting limit raised to Rs 1 crore of total income
> Reference of sec 44BBC (cruise biz) added
> Enhanced reporting for deductions [80C,10(13A)] etc.
> TDS section code to be reported in Schedule-TDS

Here are the main changes: 

As per information provided by the tax department, the ITR-3 form includes a section dedicated to dividing capital gains. This division allows taxpayers to calculate capital gains for tax purposes before and after July 23, 2024, in line with revisions outlined in the Finance Act, 2024.

Likewise, the ITR-3 form enables individuals to declare a capital loss from share buyback if the associated dividend income is categorised as income from other sources, in accordance with the amendment starting on October 1, 2024.

The asset and liability reporting limit in the ITR form has been increased to Rs 1 crore of total income. 

Additionally, a reference to Section 44BBC of the Income Tax Act for cruise businesses has been included in the ITR-3 form. 

Furthermore, there is a dedicated column for detailed reporting of deductions like Section 80C, 10(13A), etc. and it is required to report the TDS section code in the TDS schedule of the ITR-3 form.

"The CBDT has officially notified the ITR-3 for AY 2025-26, marking the start of income tax filing for FY 2024-25. Notable updates include the split of capital gains based on the Finance Act 2024, which requires taxpayers to categorize gains before and after 23rd July 2024 for accurate tax calculation. The reporting limit for assets and liabilities has been raised to Rs. 1 crore of total income, ensuring greater transparency for higher-income individuals. The form also includes provisions for cruise business taxation under Section 44BBC, enhanced reporting for deductions like 80C and HRA, and the requirement to report TDS section codes for better tracking and compliance," said CA Mohammed Chokhawala, Tax Expert, ClearTax

Eligibility for ITR-3 form

This income tax return form is intended for individuals and Hindu Undivided Families (HUFs) who receive income, profits, or gains from their business or profession. This form must be completed by taxpayers falling into any of the following categories:

Individuals with income from a proprietorship business or profession, including both audited and non-audited cases.
Individuals with income from multiple house properties.
Individuals with income classified under "Capital Gains", such as profits from selling shares, mutual funds, or property.
Individuals with foreign income or ownership of assets outside of India.
Individuals looking to carry forward and offset losses from previous years under the categories of "Capital Gains" or "Business/Profession".

Tax rebate calculation

The CBDT has announced a significant change to the tax rebate calculation under Section 87A for the fiscal year 2025-26. According to the latest guidelines outlined in the Finance Act 2025, capital gains from specific assets will be excluded from the rebate calculations under the new tax regime. 

Notably, this affects gains taxable under Sections 111A and 112, which have special rates applied under the Income-tax Act, 1961. 

Under the new tax regime of Section 115BAC, resident individuals will not include incomes chargeable at special rates in the rebate calculation. "It is provided that where resident individuals opt for the new tax regime of Section 115BAC, the incomes chargeable to tax at special rates (for example, capital gains taxable under Section 111A, Section 112, etc.) shall be excluded from calculating the Section 87A rebate," the CBDT outlined. 

This means that only income taxed at the standard slab rates, such as salary or business income, will be eligible for rebate consideration. As a result, taxpayers with significant capital gains may find their rebate eligibility affected under the new rules.

Besides, the CBDT has increased the income threshold and the maximum rebate amount under Section 87A. For the fiscal year 2025-26, the income threshold for claiming a tax rebate has been raised from ₹7 lakh to ₹12 lakh, while the maximum rebate amount has been increased from ₹25,000 to ₹60,000.