The income tax is a type of direct tax collected by the government of India on the income earned during the financial year by individuals, HUFs, partnership firms, and businesses. It is calculated based on the tax slabs defined by the Income Tax Department. Any individual or entity that has earned income in a given financial year is legally liable to pay income tax to the government of India. The process of paying tax to the government of India is known as ‘filing an income tax return or ITR’. It is mandatory to file an income tax return under the Income Tax Act, 1961. Income tax e-filing is the process of filing IT returns electronically or digitally.
The process of tax computation and payment can be confusing to taxpayers. However, thanks to several government resources and easy online filing processes, you can now submit your tax return in a matter of a few minutes. In today’s digital age, you can submit your return from the comfort of your home or office by registering on the Income Tax e-filing website.
Income tax e-filing has made the ITR filing process very easy for the assessment year (AY) 2023-24. This blog will focus on the ITR-3 form which has to be used by individuals and HUFs earning income from a proprietary business or a profession.
What is ITR-3 form?
There are various categories of taxpayers in India. Taxpayers are categorized based on their residential status and type of business. Each type requires a different form to file income tax returns. One such form is ITR-3, which is considered the most complicated ITR form for taxpayers, especially for a layman.
Eligibility for ITR-3 form
ITR-3 is a form that applies to resident individuals and Hindu Undivided Families (HUFs). To file income tax returns with an ITR-3 form, an assessee must earn his/her income from a proprietorship business or a profession.
Therefore, if you generate an income through a proprietary business or a profession from fields such as accountancy, architecture, medicine, engineering, etc., you can use ITR-3 for income tax e-filing.
The return may include income from house property, salary/pension, capital gains, and income from other sources.
Please note: Partners of partnership firms engaged in business/profession cannot file ITR-3 and should use ITR-2 instead.
New updates in ITR-3 form
The finance ministry and the Income Tax department make changes to the ITR forms every year to incorporate changes in the income pattern. Below are the changes incorporated in the ITR-3 form for the assessment year 2023-24 which is financial year 2022-23.
- A new schedule, Virtual Digital Assets (VDA), has been introduced to report your revenue from crypto/other VDA separately. If you consider your revenue from VDA to be capital gains, you’ll need to report a quarterly break-up under the “Capital Gains Schedule”. Under the new Income Tax Reform Act (ITR-3), each transaction in a VDA must be reported, including the dates on which it was bought and sold.
- In addition to the standard questions, there are a few additional questions that have been added to the ITR 3 to see if you have opted out of applying the new tax regime in prior years.
- Foreign institutional investors (FII/FPI) must provide their SEBI registration number as an additional disclosure measure.
- There has been a small change in balance sheet reporting. According to the new ITR-3 form, advances received from individuals specified in Sec 40A(2)(b) of the Income Tax Act and others must be reported under the ‘Advances’ heading in Source of Funds.
- Turnover and income from intraday trading must be reported under the newly introduced section ‘Trading Account’.
Steps to e-file ITR-3
Just like all your other financial transactions, taxation is also online now. The process of filing your tax returns online is known as income tax e-filing. Income tax e-filing has many advantages such as prompt process, improved accuracy, convenience, confidentiality, ease of use, etc.
You can e-file your ITR-3 form in the following ways:
- By using a digital signature while submitting a return electronically.
- By electronically transmitting the data in ITR-3 form with an electronic verification number.
- By sending the information in the ITR-3 form electronically and then physically mailing the return verification in the ITR-V form to the income tax office.
Let’s dive deep into the e-filing process so that you can file your ITR before the due date with confidence.
Essential documents required for e-filing ITR-3
- Aadhaar card
- Bank account details
- Form 16 (if applicable)
- Investments details
- Books of accounts
You can file your ITR-3 online by following these step-by-step instructions.
Follow these steps for easy ITR-3 online filing
- Step 1: You can start the income tax e-filing process by following these steps. ITR-3 online filing process can be initiated from the official e-filing web portal of the Income Tax Department.
- Step 2: Log on to this portal by entering your user ID (PAN), password, and a captcha code. However, if you are a new user, you need to first register an account with the portal.
- Step 3: Select the option ‘e-File’ on the menu and click on ‘Income Tax Return’ from the drop-down menu.
- Step 4: This page auto-populates your PAN details. Now, go ahead and select ‘Assessment Year’ for which you are filing the ITR. Then, select ‘ITR Form Number’ where you should opt for ‘ITR-3’.
- Step 5: Choose the status: Individual/HUF
- Step 6: State the reason for filing ITR (income from proprietary business/profession)
- Step 7: Add bank account details
- Step 8: Choose ‘Filing Type’ as ‘Original.’ If you wish to file a revised return against a previously filed original return, then select ‘Revised Return.’
- Step 9: Find the option ‘Submission Mode’ and select ‘Prepare and Submit Online.’ Now, click on ‘Continue.’
- Step 10: At this point, you are required to provide details of income, exemptions, deductions as well as investments. After that, add the details of tax payments by way of TDS, TCS, and/or advance tax.
- Step 11: Remember to fill in all data carefully and accurately. Additionally, click on ‘Save the Draft’ periodically to avoid losing any data.
- Step 12: Select your preferred verification option from the following:
- Instant e-verification
- E-verification at a later date but within 30 days from the date of filing ITR-3
- Verification through a duly signed ITR-V sent to CPC (Centralised Processing Centre) via post and within 30 days of filing a return.
- Step 13: Select ‘Preview and Submit’, and then ‘Submit.’
A point to note here is that it is mandatory to verify returns electronically under digital signature for accounts requiring auditing u/s 44AB.
Additionally, when you select the option ‘I would like to e-verify,’ you can opt for instant e-verification in any one of the following manners:
- Digitally sign the verification part
- Authenticate the process by way of an electronic verification code (EVC)
- Use your Aadhaar details to enter an OTP
- Authenticating through a prevalidated bank or demat account
Important considerations for income tax e-filing
Income tax e-filing can be a daunting task for many individuals, especially if they are unfamiliar with the process. However, accuracy of information is a must when filing your ITR to avoid receiving intimation from the Income Tax Department.
We have listed some crucial consideration points for you here so that you can easily navigate the online tax filing process. By paying attention to these factors, you can avoid errors, minimize stress, and maintain compliance with tax regulations.
- Choose the correct ITR form based on your income sources. Selecting the right form ensures accurate reporting and prevents errors.
- Ensure to incorporate all revenue streams in the return
- Compile Income Documents
- Accurate Income Reporting
- Declare Interest and Dividends
- Rental Income and Expenses
- Freelance Work and Business Income
- Capital Gains
- Foreign Income
- Ensure the accuracy of TDS information
- Choose the appropriate tax regime
- File your ITR on time to avoid penalties
Note: Pre-validate at least one bank account for refund and link PAN with Aadhaar for a smooth filing process.
Income tax e-filing is not a complicated process if you do it diligently. While filing your ITR-3 form online can appear confusing, there is no reason to postpone it till the deadline. We understand the importance of accurate, on-time filing of your ITR, and hence this comprehensive guide to handhold you through the ITR e-filing process.
Is the tax filing date extended?
The deadline to file the income tax return (ITR) for FY 2022-23 (AY 2023-24) was originally July 31, 2023. If you are wondering whether the income tax department has extended this deadline or not, the answer is no. The income tax department has not extended the deadline to file ITR.
Which is the last date for ITR filing?
The last date to file ITR for individuals is 31 July of the relevant assessment year, while the deadline is 31 October for taxpayers whose accounts are subject to audit.
What is TDS in income tax?
TDS is short for Tax Deducted at Source. Under this mechanism, if a person (deductor) is liable to make a payment to any other person (deductee), such payment will be made to the deductee after reducing tax at source. The TDS amount deducted will be remitted to the central government.
Who should file an income tax return?
All individuals, up to the age of 59, whose total income for a financial year exceeds Rs 2.5 lakh. For senior citizens (aged 60-79), the limit increases to Rs. 3 lakh, and for super senior citizens (aged 80 and above), the limit is Rs. 5 lakh.
What is the difference between ITR 1 and ITR 2?
ITR 1 is for residents with income from salaries and other sources, ITR 2 is for those without business income, and ITR 4 is for those using presumptive taxation.