Income Tax E-Filing of ITR-3 is applicable to Individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession, whether as a proprietor, freelancer, consultant, or partner in a firm.
ITR-3 is the most detailed individual return, designed to capture profit & loss statements, balance sheets, capital accounts, depreciation, and tax audits (if applicable). It also covers all other income such as salary, capital gains, house property, and foreign income.
You should file ITR-3 if you have
- Business income (proprietorship, trading, manufacturing, online business)
- Professional income (CA, doctor, lawyer, consultant, architect, freelancer)
- Income as a partner in a partnership firm
- Income from salary, capital gains, house property, or foreign assets along with business income
You should not file ITR-3 if
- You opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE (ITR-4 applies)
- You have only salary or capital gains without business income
ITR-3 is filed electronically through the portal of the Income Tax Department and carries
the highest level of disclosure and scrutiny among individual returns.
Eligibility Criteria for ITR-3
You are required to file ITR-3 if
- You are an Individual or HUF
- You have income from business or profession
- You maintain books of accounts or are required to do so
- Your income may include any other source (salary, capital gains, foreign income, etc.)
There is no upper income limit for filing ITR-3.
Income Covered Under ITR-3
ITR-3 allows reporting of
- Business or professional income
- Salary or remuneration from partnership firms
- Income from house property
- Capital gains (shares, mutual funds, property, crypto, etc.)
- Interest, dividend, and other income
- Foreign income and foreign assets
- Speculative and non-speculative income
This return includes mandatory financial schedules such as
- Profit & Loss Account
- Balance Sheet
- Depreciation schedules
- Capital account
- Audit details (if applicable)
Income Slabs, Rebate & Marginal Relief – Critical for ITR- 3 Filers
New Tax Regime Slabs (Normal Income)
- Upto₹4lakh–Nil
- ₹4lakhto₹8lakh–5%
- ₹8 lakh to ₹12 lakh – 10%
- ₹12 lakh to ₹16 lakh – 15%
- ₹16 lakh to ₹20 lakh – 20%
- ₹20 lakh to ₹24 lakh – 25%
- Above ₹24 lakh – 30%
These slabs apply only to normal income, not to capital gains or special-rate income.
Section 87A Rebate – Limited Practical Use in ITR-3
While the new regime rebate limit is ₹12 lakh, many ITR-3 filers do not fully benefit because
- Business income is often higher
- Capital gains and crypto income are excluded
- Loss set-offs can alter taxable income composition
₹12 lakh is not a zero-tax slab. Tax is first calculated, then rebate is applied if eligible.
Marginal Relief – Important Safety Net
If your taxable income slightly exceeds ₹12 lakh, Marginal Relief ensures
- Tax payable does not exceed the excess income
- Sudden loss of rebate benefit is avoided
- Income: ₹12,10,000
- Excess over threshold: ₹10,000
- Tax payable is capped near ₹10,000, not full slab tax
This is especially relevant for professionals with fluctuating income.
Business & Professional Income – Key Reporting Areas
ITR-3 requires detailed disclosure of
- Gross receipts and turnover
- Allowable and disallowable expenses
- Depreciation as per Income Tax Act
- Stock valuation
- Partner remuneration and interest
- GST turnover reconciliation (where applicable)
Incorrect reporting here is the most common reason for scrutiny and audits.
Audit Applicability (If Relevant)
You may be liable for tax audit if:
- Business turnover exceeds prescribed limits
- Professional receipts cross audit thresholds
- You claim losses or lower profits beyond permitted limits
Audit details must be accurately reported in ITR-3.