New ITR-3 Form Announced for Income Tax Return Filing for Financial Year
The Income Tax Department has officially released the Income Tax Return (ITR) Form 3 for the financial year 2024-25, aimed at individuals and Hindu Undivided Families (HUFs) engaged in business or professional activities. This announcement, made on the X platform, confirms that the ITR-3 for Assessment Year 2025-26 was notified on April 30. Notably, the new form introduces significant changes, including an increase in the reporting threshold for assets and liabilities, which is expected to ease the filing process for many taxpayers.
Key Changes in ITR-3
One of the most notable updates in the ITR-3 form is the increase in the reporting threshold for assets and liabilities under ‘Schedule AL’ from Rs 50 lakh to Rs 1 crore. This change aims to reduce the compliance burden on middle-income taxpayers by lessening the amount of information they need to disclose. Additionally, the Schedule Capital Gains section now mandates separate reporting of capital gains based on whether they occurred before or after July 23, 2024. This distinction is crucial for taxpayers as it aligns with the proposed adjustments to long-term capital gains tax rates.
Following the Budget presentation on July 24, 2024, the government proposed a reduction in the long-term capital gains tax on property from 20% with indexation benefits to 12.5% without indexation. Taxpayers who acquired properties before the specified date will have the option to choose between these two tax regimes, allowing for greater flexibility in tax planning.
Enhancements for Tax Filers
The revisions to ITR Form 3 also include enhancements aimed at simplifying the filing process. Sandeep Sehgal, a partner at AKM Global, noted that the Central Board of Direct Taxes (CBDT) has made significant modifications to improve compliance for individuals and HUFs. The introduction of dropdown menus for deductions, such as those under Section 80C, and section-wise reporting of Tax Deducted at Source (TDS) are among the key improvements. These changes are designed to enhance transparency and accuracy in tax reporting.
Moreover, the authorities had previously announced ITR forms 1 and 4 for the assessment year 2025-26, which also feature simplified processes for individuals with long-term capital gains up to Rs 1.25 lakh from listed equities. The incorporation of alterations regarding deductions under various sections, along with the dropdown menu for tax filers, reflects the government’s commitment to streamline the tax filing experience.
Implications for Taxpayers
The changes introduced in the ITR-3 form are expected to have a significant impact on taxpayers, particularly those in the middle-income bracket. By raising the reporting threshold for assets and liabilities, the government aims to alleviate some of the compliance pressures faced by these individuals. The option to choose between different tax regimes for long-term capital gains also provides taxpayers with more control over their tax liabilities.
As the tax landscape continues to evolve, these updates signify the government’s ongoing efforts to promote ease of compliance and improve data accuracy. Taxpayers are encouraged to familiarize themselves with the new ITR-3 form and the associated changes to ensure a smooth filing process for the upcoming assessment year.
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