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ITR-3 Decoded

With the availability of up to 7 ITR forms, it can get a little confusing to find out which ITR is applicable for yearly income tax compliance duties. In this article, we will be specifically looking at ITR-3.

For the AY 2020-21, the ITR-3 is required to be filed by individuals and HUFs having income from profits and gains of business or profession. It can be said that this ITR is the most comprehensive ITR available for individuals and HUFs.

Contents of ITR-3

Let us look at the various schedules forming part of this return:

1) Part A – General:

This schedule requires the taxpayer to enter his details and audit information. Some new additions include:

  • The requirement of Unique Document Identification Number (DIN) of the notice/order, if the return is being filed in response to a notice u/s 139(9)/142(1)/148/153C or an order u/s 119(2)(b).
  • Disclosures applicable only to those persons who are filing returns due to the seventh proviso to section 139(1) (Persons whose total income exceeds the maximum amount chargeable to tax but are not required to file returns):
  • Aggregate deposit of > INR 1 crore into current account(s),
  • Foreign travel expenditure > INR 2 lakhs and
  • Electricity expenditure of > INR 1 lakh during the financial year.
  • Specific Yes or No questions to check for the applicability of Tax Audit

2) Nature of business:

The code applicable to the relevant sub-sector of the business will need to be selected, and the name of the proprietorship can be entered in this schedule.

3) Part A-BS:

The balance sheet amounts will have to be entered in the relevant fields in case the assessee is required to maintain books of accounts as per section 44AA. If he does not maintain books of accounts, only limited information such as total debtors, creditors, stock-in-trade and cash balance will have to be provided.

4) Manufacturing Account:

For manufacturing entities, the relevant fields in this schedule will have to be filled to arrive at the Cost of Goods Produced. The Cost of Goods Produced amount will be transferred to the ‘Trading Account’ schedule.

5) Trading Account:

This filling up of this sheet will result in arriving at the amount of gross profit which will then be transferred to the ‘Part A – P & L’ schedule.

6) Part A – P & L:

This is the schedule where amounts forming part of the profit and loss account are entered. There is a separate section for Provisions of tax and Appropriations with the final balance (if any) being transferred to the Proprietor’s capital account. After this, there is also a section for filling up information relating to the various presumptive schemes of taxation. The final section of this schedule will need to be filled up where no accounts are maintained.

Note: In case books of accounts are not maintained, there will be no entry made in the Manufacturing Account Schedule and Trading Account Schedule.

7) Part A – OI:

Initial adjustments under the income tax act to the profit/loss figure is made in this schedule. A new field has been inserted, which requires the assessee to confirm if he is exercising the option u/s 92CE(2A) (Transfer Pricing provisions). If he selects ‘Yes’, he will have to fill up the ‘TPSA’ (details of tax on secondary adjustment) schedule too.

8) Part A – QD:

The quantitative details relating to the raw materials, finished goods and by-products of manufacturing/trading entities will have to be provided.

9) Schedule S:

Details relating to the salary income are furnished in this schedule.

10) SCH HP:

Income from House Property will be calculated in this sheet.

11) Schedule BP:

The final adjustments to calculate the income under the head Profits and Gains of Business and Profession are made in this table. This also includes the set-off of business losses, if any.

12) Schedule DPM and Schedule DOA:

The details relating to the depreciation of capital assets are entered according to the respective block of assets.

13) Schedule DEP and Schedule DCG:

A summary sheet of the depreciation for the year is displayed based on the figures entered in the previous schedule. Further, the deemed capital gain on sale of depreciable assets is also calculated.

14) Schedule ESR:

This schedule is included for providing details relating to expenditure on scientific research.

15) Schedule CG:

The calculation of Capital Gain/Loss is done in this schedule. Information relating to disposals of capital assets and various deductions claimed u/s 54 are to be provided. Further, the amount of capital gains accruing at each advance tax instalment date will have to be entered.

16) Schedule 112A:

The capital gain specifically arising from sale of equity shares, unit of the equity-oriented fund or a unit of a business trust on which Securities Transaction Tax (STT) is paid will be calculated in this schedule.

17) Section 115AD(1)(iii) proviso:

This schedule contains similar requirements as the previous schedule except that it is meant for non-residents.

18) Schedule OS:

The computation of income from other sources is done in this schedule. The assessee has to ensure that even income clubbed in his hands is included under this head.

19) Schedule CYLA and Schedule BFLA:

These schedules only indicate the amount of current year losses adjusted, and the amount of losses brought forward and adjusted in the current year.

20) Schedule CFL:

After all the adjustments are carried out in the previous schedule, the details of losses to be carried forward in future years are entered in this schedule.

21) Schedule UD:

The unabsorbed depreciation is brought forward and set off against the current year income (if necessary) with the balance amount being carried forward to future years. This schedule also keeps track of allowances u/s 35(4).

22) Schedule ICDS:

The effect of the various ICDS (Income Computation & Disclosure Standards) related adjustments on the profit is entered here.

23) Schedule 10AA:

The amount of deduction claimed in respect of units in SEZ (Special Economic Zone) u/s 10AA will have to be entered in this schedule.

24) Schedule 80G:

The details and the amount of deduction claimed in respect of donations as per section 80G is recorded here.

25) 80D:

This schedule allows to enter various amounts of deduction available in respect of medical insurance premium under the respective categories.

26) Schedule RA:

The details of donation to specified entities covered u/s 35(1)(ii), 35(1)(iia), 35(1)(iii) or 35(2AA) are recorded in this schedule.

27) Schedule 80-IA; Schedule 80-IB; Schedule 80-IC or 80-IE:

The amount of deductions available in respect of the industrial undertakings as per section 80-IA, 80-IB, 80-IC or 80-IE is to be entered.

28) Schedule VI-A:

All the deductions under Chapter VI-A not covered under earlier schedules will be covered in this schedule.

29) Schedule SPI, Schedule SI and Schedule IF:

Details of persons whose income is to be clubbed in the hands of the assessee will be entered in Schedule SPI. Schedule SI records the income taxable at special rates and Schedule IF requires the assessee to provide information about any partnership firm where he was a partner.

30) Schedule AMT:

The computation of adjusted total income and alternate minimum tax as per section 115JC is done in this schedule.

31) Schedule AMTC:

The details relating to the set-off and carry forward of AMT credit are entered in this schedule.

32) Schedule EI:

This schedule is used for entering details relating to exempt income.

33) Schedule PTI:

Where the assessee receives Pass-Through Income from business trust or investment fund as per section 115UA/115UB, the details relating to the same are entered in this schedule.

34) Schedule FSI:

A resident can take credit of taxes paid outside India as per the applicable DTAA (Double Taxation Avoidance Agreement). The relevant fields for claiming tax relief will be available in this schedule.

35) Schedule TR and Schedule FA:

A summary of the tax relief claimed can be found in Schedule TR. Schedule FA will require the taxpayer to give information relating to various foreign assets/foreign incomes such as Foreign Depository Accounts, Foreign Custodial Accounts, Interests in Foreign Entities (whether by way of equity, debt or any other means), Foreign Insurance/Annuity contracts, immovable property, other capital assets, signing authority in foreign bank accounts, foreign trusts, miscellaneous foreign income not already included in earlier schedules, etc.

36) Schedule 5A:

This schedule will need to be filled only by those individuals to whom the Portuguese Civil Code applies.

37) Schedule AL:

Where the total income of the assessee exceeds INR 50 lakhs, information relating to personal assets and liabilities will have to be provided in this schedule.

38) Details of Investments:

Where certain investments, deposits or payments are made to claim deduction under Chapter VI-A, a grace period has been allotted up to 31.07.2020 for the AY 2020-21. A bifurcation is provided to divide the amounts between those invested up to 31.03.2020 and those invested between 01.04.2020 to 31.07.2020. Further, details of investments covered u/s 10AA, sections 54 to 54GA, etc. will have to be provided with the appropriate bifurcation.

39) Schedule GST:

This schedule aims in reconciling the turnover figure declared in the income-tax return with the aggregate turnover as reported in Form GSTR-1 for the FY 2019-20.

40) Part B – TI and Part B – TTI:

This schedule prepares the final computation of income after extracting the appropriate amounts from the other schedules in the return.

41) Schedule IT:

The details of advance tax and self-assessment tax paid will be entered in this schedule.

42) Schedule TDS:

This schedule requires the details of tax credits arising due to TDS and TCS made in respect of the assessee.

43) Schedule Verification:

This is the final page of the return that establishes who the signatory of the return is.