Important ITR-3 Changes for AY 2025-26 You Need to Know Now

ITR-3 Form Updated for AY 2025-26: What Taxpayers Need to Know

The Central Board of Direct Taxes (CBDT) has initiated preparations for the forthcoming tax filing season! On April 30, 2025, through Notification No. 41/2025, the CBDT officially announced the ITR-Form 3 for the Assessment Year (AY) 2025-26. This assessment year corresponds to the Financial Year 2024-25, which includes income earned between April 1, 2024, and March 31, 2025.

ITR-3 is the designated form for Individuals and Hindu Undivided Families (HUFs) who have income categorized under "Profits and Gains of Business or Profession." If this describes you, it’s essential to be attentive to the newly notified changes for accurate and compliant tax filing.

According to the notification, here’s a summary of the significant updates integrated into ITR-3 for AY 2025-26:

What’s Different? The Schedule-Capital Gain, where you disclose profits or losses from the sale of capital assets, has been divided. You will now need to separately report gains realized before July 23, 2024, from those realized on or after that date.

Reason: This modification is a direct result of amendments made in the Finance Act, 2024. It likely pertains to adjustments in the taxation or treatment of specific capital gains effective from this date.

Consequences: Taxpayers must maintain careful records of transaction dates to ensure gains are reported accurately in the correct section of the schedule. This might influence tax computations based on the type of assets and specific provisions dictated by the Finance Act, 2024.

What’s Different? A specific requirement now applies to claiming a capital loss that results from a share buyback transaction occurring post-October 1, 2024.

The Requirement: Such a capital loss can only be claimed if the corresponding dividend income from that buyback transaction is reported by the taxpayer under the category 'Income from Other Sources.'

Consequences: This aims to guarantee consistency in reporting. If you partially classify the proceeds as dividend income (which may be subject to different taxation), you must accurately reflect this to claim the associated capital loss. Diligent classification of income from buybacks after this date is crucial.

What’s Different? The obligation to report assets and liabilities in Schedule AL has been significantly loosened.

The Change: Taxpayers are now only required to complete Schedule AL if their total income surpasses ₹1 crore during the financial year.

Consequences: This change is a relief for many taxpayers filing ITR-3. Previously, this schedule was often necessary for those with total income exceeding ₹50 lakh. This update reduces compliance requirements for individuals and HUFs with business income below the elevated threshold.

What’s New? The form now features specific references or fields pertaining to Section 44BBC of the Income Tax Act.

What is Sec 44BBC? This section pertains to a presumptive taxation scheme applicable to non-resident taxpayers involved in the operation of ships, with the notification underscoring its relevance to cruise businesses.

Consequences: While it applies to a niche sector, this modification ensures that non-residents covered by this particular presumptive tax regime have the appropriate fields to accurately report their income within ITR-3.

What’s Different? The revised ITR-3 requires more detailed information when claiming various common deductions.

The notification clearly indicates that there are new enhanced reporting obligations for deductions under Section 80C (which includes well-known investments such as PPF, ELSS, life insurance premiums, etc.) and Section 10(13A) (House Rent Allowance - HRA). This may require providing more detailed information regarding the nature of the investment or expense.

Effect: Taxpayers must keep meticulous records for all deductions claimed. Be prepared to offer more specific breakdowns or details compared to prior years, promoting transparency and aiding in verification.

What’s Changed? When detailing Tax Deducted at Source (TDS) in Schedule-TD, merely stating the amount deducted is no longer adequate.

The Requirement: Taxpayers are now obliged to report the specific TDS section code under which the payer deducted the tax.

Effect: This improves the precision of TDS reporting, allowing better reconciliation with Form 26AS/AIS. It assists the tax department in correctly associating deductions with the relevant income and TDS regulations.

Who Should Prepare?

Mainly, Individuals and HUFs earning income from:

• Operating a business
• Practicing a profession

If your sources of income fit these categories, ITR-3 is probably the form applicable to you, and these modifications will directly affect your filing for AY 2025-26.

These updates highlight the Income Tax Department's ongoing efforts to:

• Align tax forms with legislative updates (Finance Act, 2024).
• Boost transparency in reporting (deductions, TDS).
• Enhance data accuracy for evaluation purposes.
• Offer targeted relief where necessary (Asset & Liability reporting threshold).

1. Recognize: Understand that the form you utilized last year has been updated.
2. Examine Records: Begin organizing your financial documents for FY 2024-25, bearing these specific reporting requirements (especially transaction dates for capital gains, details for deductions) in mind.
3. Consult Your Advisor: Talk through these updates with your tax consultant or Chartered Accountant to comprehend how they relate to your situation.
4. Stay Informed: Keep an eye out for the launch of the updated ITR-3 utility/schema and the related instructions from the Income Tax Department for comprehensive guidance.

Familiarizing yourself with these ITR-3 changes early on provides both taxpayers and professionals with sufficient time to prepare for a more streamlined and accurate tax filing process for AY 2025-26. Stay knowledgeable, stay compliant!

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