CBDT Notifies New ITR-3 Form: Key Changes for Business Owners and Professionals for FY 2024-25

In a significant development for taxpayers earning income from business or professional activities, the Central Board of Direct Taxes (CBDT) has issued Notification No. 41/2025 dated April 30, 2025, introducing the new Income Tax Return Form ITR-3 for Assessment Year (AY) 2025-26. This amendment to the Income-tax Rules, 1962, brings several important changes that will impact individuals and Hindu Undivided Families (HUFs) engaged in business or professional activities.

Who Needs to File ITR-3?

The ITR-3 form is applicable for:

• Individuals and HUFs having income from business or profession
• Taxpayers not eligible to file ITR-1, ITR-2, or ITR-4
• Those having income from proprietary business or profession

The revised ITR-3 form will be effective from April 1, 2025, giving taxpayers adequate time to understand and comply with the new requirements.

Key Changes in the New ITR-3 Form

1. Enhanced Disclosure Requirements

The new form demands significantly more detailed disclosures compared to previous versions:

• Comprehensive Business Information: Taxpayers must now provide extensive details about their business operations, including gross receipts, profit and loss account data, and complete balance sheet information.
• Manufacturing and Trading Accounts: Separate sections for manufacturing and trading accounts require detailed break-up of expenses and income.

2. New Tax Regime Selection

The form includes specific fields for taxpayers to indicate their choice regarding the new tax regime under Section 115BAC:

• Taxpayers must explicitly specify whether they are opting in or out of the new tax regime
• Details of Form 10-IEA filing (if applicable), including filing date and acknowledgment number
• Separate computation sections for income under both old and new tax regimes

3. Enhanced Foreign Asset and Income Reporting

The new ITR-3 introduces expanded sections for:

• Detailed Residency Status: More comprehensive information about the taxpayer’s residential status
• Foreign Assets: Complete disclosure of all assets held outside India
• Foreign Income Sources: Detailed reporting of all income derived from sources outside India
• Non-Resident Specific Information: Non-residents must disclose their tax residency jurisdiction and whether they have a Significant Economic Presence (SEP) in India

4. Corporate Relationship Disclosures

Individuals with corporate connections face additional reporting requirements:

• Directorship Details: Individuals who served as directors in any company during the financial year must provide the names of those companies, their PAN, and other relevant information
• Shareholding Information: Details of unlisted equity shares held at any time during the year, including cost of acquisition and sale proceeds

5. Audit Information

For businesses subject to audit under various provisions, the form requires:

• Complete auditor details
• Date of audit report issuance
• Unique Document Identification Number (UDIN)
• Nature and code of business or profession
• Compliance information related to various sections including 44AB and 92E

6. Presumptive Income Sections

The form includes dedicated sections for those declaring income under presumptive taxation schemes:

• Section 44AD (for eligible businesses)
• Section 44ADA (for professionals)
• Section 44AE (for transporters)

Each section contains fields to calculate presumptive income as per the applicable provisions.

7. Reporting of High-Value Transactions

In line with the government’s focus on high-value transaction monitoring, taxpayers must now report if they have:

• Deposited more than Rs 1 crore in a current account
• Spent over Rs 2 lakh on foreign travel
• Paid electricity bills exceeding Rs 1 lakh

8. Comprehensive Deduction Details

The updated form includes expanded sections for:

• Chapter VI-A deductions
• Itemized breakup of various deductions claimed
• Supporting documentation references

Implications for Taxpayers

The revamped ITR-3 form represents a significant shift toward greater transparency and comprehensive financial reporting. While it may increase the compliance burden in terms of data collection and reporting, it aligns with global best practices in tax administration.

Preparation Recommendations

1. Early Documentation: Start gathering all required information well before the filing deadline
2. Professional Assistance: Consider consulting with a chartered accountant familiar with the new requirements
3. Digital Record-Keeping: Maintain proper digital records of all financial transactions
4. Tax Regime Analysis: Conduct a thorough analysis to determine whether the old or new tax regime is more beneficial
5. Compliance Review: Ensure all audit requirements are met well before the filing deadline

Technology Adaptation

The Income Tax Department’s e-filing portal is expected to be updated to accommodate these changes. Taxpayers are advised to:

• Use the official e-filing portal for submission
• Verify all pre-filled data carefully
• Maintain electronic copies of all supporting documents
• Ensure digital signatures and verification methods are up-to-date

Conclusion

The notification of the new ITR-3 form underscores the government’s commitment to enhancing the tax filing framework with more comprehensive disclosure requirements. While these changes may initially seem challenging, they ultimately contribute to a more transparent and efficient tax administration system.

Business owners and professionals should take proactive steps to understand these changes and ensure compliance with the new reporting requirements. Early preparation, proper documentation, and professional guidance will be key to navigating the new ITR-3 form successfully for AY