ITR-3 Filing for AY 2025–26: Eligibility, Key Updates, and Filing Guide

The Income Tax Department has released the updated ITR-3 form for the Assessment Year (AY) 2025–26 via Notification No. 41/2025, effective from April 1, 2025. This return form is applicable to individuals and Hindu Undivided Families (HUFs) who earn income from proprietary businesses, professions, or from being partners in firms.

With updates that include bifurcated capital gains reporting, enhanced disclosure thresholds, and deduction-specific reporting, it is important that eligible taxpayers understand how to file ITR-3 correctly and avoid non-compliance.

Who Should File ITR-3?

The ITR-3 form is meant for resident and non-resident individuals and HUFs with income from any of the following sources:

  1. Income from Proprietorship Business

This includes any individual operating a sole proprietorship. Common examples are traders, shopkeepers, small-scale manufacturers, freelancers with a registered GST or business presence, and e-commerce sellers.

  1. Income from Profession

Professionals such as doctors, chartered accountants, architects, interior designers, lawyers, consultants, and engineers, whose income is derived from their professional practice and who do not opt for presumptive taxation under Section 44ADA, must file ITR-3 if their gross receipts exceed ₹75 lakh.

  1. Partners in Firms

Partners of a firm—whether or not engaged in day-to-day operations—must file ITR-3 to report:

  • Profit share from the firm (exempt under Section 10(2A))
  • Remuneration received from the firm
  • Interest on capital or loan given to the firm

  1. Other Income Sources

Apart from professional and business income, ITR-3 accommodates additional sources of income, including:

  • Salary and pension
  • Income from multiple house properties
  • Capital gains (short-term or long-term)
  • Interest income, dividends, and other miscellaneous income

Who Cannot File ITR-3?

ITR-3 is not the correct form in the following cases:

Salaried Individuals Without Business or Professional Income

If a taxpayer only has salary, house property, or interest income, ITR-1 or ITR-2 is more appropriate.

Professionals Opting for Presumptive Taxation (Section 44ADA)

Professionals with gross receipts up to ₹75 lakh who choose presumptive taxation under Section 44ADA should file ITR-4 instead.

LLPs, Companies, and Other Business Entities

Entities like LLPs, private limited companies, and One Person Companies are required to file ITR-5 or ITR-6, not ITR-3.

Trusts, NGOs, and Political Parties

Such organizations must use ITR-7 for tax filing, depending on their structure and activities.

Key Changes in ITR-3 for AY 2025–26

The Finance Act, 2024 has introduced a few critical changes that reflect in the updated ITR-3 form for AY 2025–26:

  1. Capital Gains Bifurcation

Taxpayers are now required to report capital gains separately for transactions occurring:

  • Before July 23, 2024
  • On or after July 23, 2024

This ensures accurate computation of tax as per the revised capital gains provisions under the Finance Act.

  1. Reporting of Capital Loss from Share Buybacks

Capital loss on share buyback transactions can now be claimed if the corresponding dividend income has been declared under “Income from Other Sources.” This is applicable for buybacks post-October 1, 2024.

  1. Increase in Asset and Liability Disclosure Threshold

The threshold for mandatory reporting in Schedule AL (Assets and Liabilities) has been raised from ₹50 lakh to ₹1 crore in total income, reducing compliance burden for middle-income taxpayers.

  1. Enhanced Deduction Reporting Requirements

More specific reporting is now required for deductions under:

  • Section 80C (e.g., LIC premiums, ELSS, PPF)
  • Section 80D (health insurance)
  • Section 10(13A) (House Rent Allowance)

  1. Mandatory Reporting of TDS Section Codes

Taxpayers must now disclose the specific section under which TDS has been deducted (e.g., Section 194A for interest, 194C for contracts) to ensure consistency with Form 26AS and the Annual Information Statement (AIS).

ITR-3 Filing Due Dates for AY 2025–26

Taxpayer Category Audit Required Filing Due Date
Individual or HUF (business/profession income, no audit) No 31st July 2025
Taxpayers requiring audit under Section 44AB Yes 31st October 2025
Taxpayers covered under Transfer Pricing (Form 3CEB) Yes 30th November 2025

ITR Form Selection – Quick Comparison

Scenario Recommended ITR Form
Income from salary only ITR-1
Salary + capital gains or foreign assets ITR-2
Income from business/profession or partnership ITR-3
Professionals under presumptive taxation (44ADA) ITR-4
LLPs and registered partnership firms ITR-5
Domestic/foreign companies ITR-6

Conclusion

ITR-3 is a comprehensive tax return form intended for professionals, sole proprietors, and partners in firms. With new bifurcation rules for capital gains, increased thresholds for asset disclosures, and mandatory TDS code reporting, accurate ITR-3 filing requires careful attention.

If you are a business owner, an independent consultant, or a partner in a firm, ensure that you file ITR-3 correctly, adhering to the latest income tax regulations and documentation standards.

For expert assistance or to simplify your ITR-3 filing process, book an appointment with a Tradeviser by clicking the link below.