Navigating ITR-3 for AY 2025-2026: Key Changes, How to Fill, Compliances, and Avoiding Common Errors
Hello there, fellow taxpayers! I am thrilled to share my thoughts on the ITR-3 form for the Assessment Year (AY) 2025-2026. If you are an Individual or Hindu Undivided Family (HUF) receiving income from business or profession, then this form is probably your favourite. But with the latest changes announced by the Central Board of Direct Taxes (CBDT), there is much to unravel. Whether you are a freelancer, business owner, or dabbling in speculative trade, this blog will guide you through the principal changes, how to complete the form, key compliances, usual pitfalls, and how to deal with speculative business income. Let us make it as easy as possible!
Who needs to file ITR-3?
Before we plunge into the complexity, let us first identify who ITR-3 is for. This return is meant for individuals and HUFs having income from profits and gains of business or profession.
That includes:
- Proprietors running a business (think consultants, shop owners, or freelancers).
- Professionals like doctors, lawyers, or architects.
- Individuals with income from speculative activities (e.g., futures and options trading, intraday trading).
- Those with income from multiple sources like salary, house property, capital gains, or other sources, alongside business income.
If you have a salaried income with no business income or only small amounts of capital gains, you may be eligible for more basic forms such as ITR-1 or ITR-2. But if your finance is slightly more interesting, ITR-3 is your best bet.
Key Changes in ITR-3 for AY 2025-2026
The CBDT has introduced some major changes for ITR-3 this year, incorporating changes from the Finance Act, 2024.
These adjustments are designed to ease compliance, enhance transparency, and adapt to new taxation rules. This is what is new:
1. The reporting of capital gains has been enhanced.
The Schedule CG now asks you to apportion capital gains depending on when they happened before or after July 23, 024. The reason is that the Finance Act added a new regime of taxation for long-term capital gains (LTCG) on property:
For property sales on or after July 23, 2024, LTCG is taxed at 12.5% without indexation.
For prior sales on July 23, 2024, you can choose either 12.5% without indexation or 20% with indexation.
The division ensures that taxes are correctly calculated, particularly in the case of real estate or equity dealings.
2.Share Buyback Rules
From October 1, 2024, income arising from share buybacks is considered as dividend income under Section 2(22)(f) and disclosed in Schedule OS (Income from Other Sources). The sale consideration is disclosed as zero in Schedule CG so that the cost of acquisition can be deducted as a capital loss, which can be set off for eight years. This is a breakthrough for investors
3. Raised Asset and Liability Reporting Threshold
The limit for reporting assets and liabilities in Schedule AL has been increased from ₹50 lakh to ₹1 crore. This lightens the compliance burden for middle-income taxpayers with business income. If your overall income is less than ₹1 crore, you may overlook this elaborate disclosure.
4. Presumptive Taxation for Cruise Business
A new section, Section 44BBC, was added for non-resident cruise ship operators. It considers 20% of receipts on carriage of passengers as taxable profits. If you are operating in this niche business, you must report this in Schedule BP.
5. Crypto and Virtual Digital Assets (VDA)
Schedule VDA now mandatorily requires information reporting of income from cryptocurrency or other virtual assets, even in case of a loss. This helps maintain transparency for these rapidly growing investments.
6. Detailed Deduction Disclosures
Deductions under sections such as 80C, 80D, 80DD, 80U, and 10(13A) (HRA) now need more details, e.g., policy numbers, loan information, or acknowledgement numbers for forms like 10-IA. This minimizes errors but means you must have your documents in hand.
7. TDS Section Disclosure
You now need to mention the section code for which TDS was deducted (like 194A for interest, 194C for contracts). This will match your ITR with Form 26AS for easier reconciliation.
Tax Regime Choice
The new tax regime is the default, but you can opt for the old regime by filing Form 10-IEA before the due date. ITR-3 now asks for confirmation of past Form 10-IEA filings and your current regime choice. This is critical for business owners, as switching regimes is limited to once in a lifetime for those with business income.
How to Fill ITR-3: A Step-by-Step Guide
Filling out ITR-3 can feel like navigating a maze, but breaking it down makes it manageable. Here is how to do it, based on my years of guiding clients through this process:
1. Download the ITR-3 Utility
Head to the Income Tax Department’s e-filing portal (incometax.gov.in) and download the Excel or JSON utility for ITR-3 under AY 2025-26. The online filing option became available on July 30, 2025.
2. Gather Your Documents
Before you start, collect:
- Form 26AS and Annual Information Statement (AIS) for income and TDS details.
- Bank statements and investment proofs (e.g., PPF, ELSS, insurance).
- Profit and loss statement and balance sheet for your business.
- Capital gains details (e.g., sale deeds, share transaction statements).
- Form 10-IEA if opting for the old tax regime.
- Deduction proofs (e.g., 80C, 80D, loan details).
3. Log In and Select ITR-3
Log in to the e-filing portal using your PAN/Aadhaar and password. Select AY 2025-26 and choose ITR-3 as your form.
4. Fill Key Schedules
- Schedule BP: Report your business or professional income. Include details of speculative or specified business income separately.
- Schedule CG: Split capital gains before and after July 23, 2024. Report buyback proceeds as zero sale value and dividend income in Schedule OS.
- Schedule VDA: Enter crypto or VDA income/losses.
- Schedule AL: Fill this only if your income exceeds ₹1 crore.
- Schedule 80C, 80D, etc.: Provide detailed deduction info (e.g., policy numbers, loan account numbers).
- Schedule TDS: Specify the TDS section codes matching Form 26AS.
5. Validate and Submit
Use the utility’s validation feature to check for errors. File electronically using a digital signature (mandatory for audit cases) or an electronic verification code (EVC). For non-audit cases, the deadline is September 15, 2025; for audit cases, it is October 31, 2025 (audit report due by September 30, 2025).
Things to Remember
- Choose the Right Tax Regime: Compare the old and new regimes. If you have significant deductions (e.g., 80C, 80D), the old regime might save you more. File Form 10-IEA if opting out of the default new regime.
- Double-Check AIS and Form 26AS: Mismatches between your ITR and these documents can trigger notices.
- Keep Records for Six Years: The Income Tax Department can scrutinize returns up to six years later.
- Do not Miss the Deadline: Late filing incurs a ₹5,000 penalty and interest under Section 234A if tax is due.
- Audit Requirements: If your business turnover exceeds ₹1 crore (or ₹3 crore for 95% digital transactions under Section 44AD), a tax audit is mandatory.
Compliances to Nail
- Presumptive Taxation: When you are choosing Section 44AD (business) or 44ADA (professionals), make sure your turnover is under ₹3 crore or ₹75 lakh, respectively, with 95% of transactions being digital. Report at least 6% (business) or 50% (profession) of gross receipts as profit unless you choose otherwise.
- Form 10-IA: In case of deductions under 80DD or 80U, submit this form and place the acknowledgment number on ITR-3.
- TDS Reconciliation: Reconcile TDS claims with Form 26AS. Incorrect section codes may result in delays during processing.
- Crypto Reporting: Even if you made no profit or experienced a loss, report VDA transactions in Schedule VDA.
Common Mistakes and How to Correct Them
I have observed taxpayers fall prey to the same mistakes over the years. Here is how to prevent or correct them:
1. Mistake: TDS Details Discrepancy
Reason: Inaccurate TDS section codes or figures not tallying with Form 26AS.
Correction: Verify all entries against Form 26AS and AIS. If a discrepancy occurs, call the deductor (e.g., employer, bank) for correcting their TDS return.
2. Mistake: Inaccurate Reporting of Capital Gains
Cause: Confusing pre- and post-July 23, 2024, transactions or reporting buyback proceeds incorrectly.
Fix: Isolate gains using statements of transactions. For buybacks, report dividend income in Schedule OS and zero sale value in Schedule CG.
3. Error: Missing Deduction Details
Cause: Incomplete information for deductions such as 80C or 80D (e.g., no policy number).
Fix: Collect all investment proofs prior to submitting. Recheck schedules for fields that must be filled, such as policy numbers or loan information.
4. Error: Incorrect Tax Regime
Cause: Failing to submit Form 10-IEA for the old regime or failing to mention the regime option.
Remedy: Choose your regime well in time and submit Form 10-IEA when necessary. Verify earlier submissions in the ITR-3 form.
5. Error: Leaving out VDA Income
Cause: Failing to report crypto losses or thinking they are exempt.
Remedy: Show all VDA transactions in Schedule VDA, even if the net effect is zero or negative.
Speculative Business Procedure in ITR-3
Speculative business income, like profits from futures and options (F&O), intraday trading, or currency/commodity trading, needs special attention in ITR-3. Here is how to handle it:
1. Identify Speculative Income
Speculative income arises from transactions where delivery of the underlying asset does not occur (e.g., F&O, intraday trading). It’s taxed as business income but reported separately from regular business income.
2. Fill Schedule BP
-
- In Part B – Computation of Income from Speculative Business, enter:
- Net profit/loss from speculative activities as per your profit and loss account.
- Additions (e.g., disallowed expenses under Sections 28 to 44DA).
- Deductions (e.g., allowable expenses under Sections 28 to 44DA).
- Calculate the final income from speculative business.
- Example: If you made ₹2 lakh from F&O trading but incurred ₹50,000 in brokerage fees, report the net profit (₹5 lakh) after adjustments.
- In Part B – Computation of Income from Speculative Business, enter:
3. Set-Off and Carry Forward
-
- Speculative losses can only be set off against speculative profits in the same year.
- If you have a speculative loss, carry it forward for four years to offset future speculative profits. Report this in Schedule CFL (Carry Forward of Losses).
4. Common Pitfall: Mixing speculative and non-speculative income.
Fix: Keep separate books for speculative transactions. Use trading platform statements to track profits/losses accurately.
5. Audit Requirement: If your speculative business turnover exceeds ₹1 crore (or ₹3 crore for 95% digital transactions), a tax audit under Section 44AB is mandatory. Submit the audit report by September 30, 2025.
Final Thoughts
Filing ITR-3 for AY 2025-2026 may look intimidating, but it can be done with proper prep. Begin early, keep all the documents ready, and make a note of the new schedules for capital gains, buybacks, and deductions. If you have speculative income, handle it separately and maintain careful records of losses. And do not shy away from consulting a tax professional if your finances are complicated—better safe than sorry!
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If I add particulars of tax audit in ITR 3 Fails at the last moment to upload Return . is there any glitch in the ITR 3 Form ?
While filling ITR 3 SUBJECT TO AUDIT U/S 44AB ,FORM GETS VALIDATED NO ERROR FOUND WHEREAS VERIFICATION PAGE FOR DIGITAL SIGNATURE NOT OPENING STATING ERROR IN FORM . HAD THERE ANY GLITCH IN THE ITR FORM. PLEASE ADVISE.
Dear CA RAMESH CHANDRA SHAW
This appears to be a technical glitch on the Income Tax e-filing portal, which has occasionally been reported for ITR-3 filings in past assessment years.
Try using Offline Utility , Try clearing your browser cache or using a different browser (e.g., Chrome, Edge, or Firefox).
Dear Mohit,
Thank you for highlighting this issue with adding items under Schedule EI (Exempt Income) in the online ITR-3 filing process for FY 24-25(AY 25-26). I understand how frustrating it can be when the return fails to upload at the final stage due to technical glitches on the e-filing portal. This appears to be a system-related issue that many users have encountered in the past with certain schedules, including Schedule EI, when non-standard entries are added.
As a workaround, you may consider the following steps until the Income Tax Department resolves this issue:
If the exempt income does not fit predefined categories, try reporting it in the ITR utility’s offline mode (Excel/JSON utility) and then upload the return, as the offline utility sometimes bypasses validation errors encountered in the online portal.
I hope the Income Tax Department addresses this glitch soon, and I’ll consider adding a note in the article about such technical challenges and workarounds to assist readers. Thank you for bringing this to attention, and please feel free to share any further details or updates on this issue!
Best regards,
Sumit Agarwal
agarwaltaxconsultancy99@gmail.com
you mentioned f&o as speculative aren’t they are non- speculative only intra day is considered speculative, do correct me if i am wrong?
Thank you for your comment and for seeking clarification. Under Section 43(5) of the Income Tax Act, 1961, speculative transactions are defined as those where a contract for the purchase or sale of commodities, including stocks and shares, is settled otherwise than by actual delivery or transfer of the commodity or scrip. Intra-day trading, where positions are squared off without delivery, is indeed considered a speculative business under this definition.
However, Futures and Options (F&O) transactions, when conducted on recognized stock exchanges (such as NSE or BSE), are explicitly excluded from being treated as speculative transactions due to the proviso to Section 43(5). This is because these transactions are settled through a recognized stock exchange with standardized contracts, and thus, they are classified as non-speculative business income (or loss) for tax purposes, regardless of whether they are intra-day or held for a longer period.
If I referred to F&O as speculative in the article, I appreciate the opportunity to clarify that F&O transactions on recognized exchanges are non-speculative. I hope this addresses your query, and please feel free to share further insights or questions!
Thank you for your comment and for seeking clarification. Under Section 43(5) of the Income Tax Act, 1961, speculative transactions are defined as those where a contract for the purchase or sale of commodities, including stocks and shares, is settled otherwise than by actual delivery or transfer of the commodity or scrip. Intra-day trading, where positions are squared off without delivery, is indeed considered a speculative business under this definition.
However, Futures and Options (F&O) transactions, when conducted on recognized stock exchanges (such as NSE or BSE), are explicitly excluded from being treated as speculative transactions due to the proviso to Section 43(5). This is because these transactions are settled through a recognized stock exchange with standardized contracts, and thus, they are classified as non-speculative business income (or loss) for tax purposes, regardless of whether they are intra-day or held for a longer period.
If I referred to F&O as speculative in the article, I appreciate the opportunity to clarify that F&O transactions on recognized exchanges are non-speculative. I hope this addresses your query, and please feel free to share further insights or questions!
dear Sumit Agarwal , your article about ITR-3 avoiding common errors for filing FY 24-25 is a useful guide for all readers to follow. Would like to suggest few things to consider and make this article more complete and also accurate by taking into account below elements for a Resident individual :-
1) The article should also consider guidance for declaration under schedule FSI, TR and Fa for income and assets and also pre-filing of form 67 before fing ITR-3 to get DTAA relief for resident assesses having business, salary and foreign source/asset income.
2) The article should also consider salary income declaration guidance of assesse is having both salary and business income.
3) The article should also cover aspects of making required entries in ITR-3 by assesse who has already filed form 10IEA in previous FY 23-24 and also wants to continue filing under old tax regime in FY24-25.
4) If the assessee has business income and has rented a house then there is deduction allowed under section 80 GG for old tax regime, hence this aspect should be also covered in this article alongwith the requirement of pre- filing of form 10 BE for rent payment deduction before filing the ITR-3 .
5) The article should also cover aspects for LTCG where equity listed shares – STT paid/ equity Mutual funds – STT paid which are purchased on or before 31st Jan 2018.
6) The article should also cover STCG reporting under schedule CG specially regarding sale before 23 rd July 24 a d sale on or after 23 rd July 24.
7) The article should also cover the 87A deduction applicability and 87A deduction is not allowed against LTCG income with special rate tax, but 87A deduction is allowed only against normal income if aggregate income ( normal income after ch VII defuctions) is either 7 lacs or below in new tax regime OR 5 lacs or below in old tax regime .
8 Also the article should cover how LTCG can be adjusted against remaining amount from basic tax free slab if other normal income after CH VII deductions has not crossed the tax free slab amount.
for further correspondence and discussion my mob no is 8152885789 and email id is – captmvk@gmail.com.
please share your contact details. thanks.
mohan K.
Dear Mohan k ,
Thank you for your thoughtful and detailed feedback on my article about avoiding common errors while filing ITR-3 for FY 24-25(AY 25-26). Your suggestions are highly valuable and provide excellent insights to make the article more comprehensive and accurate for resident individuals. I truly appreciate your effort in outlining these critical aspects. Below, I address each of your points to clarify and confirm their relevance for enhancing the article:
Schedule FSI, TR, FA, and Form 67 for DTAA Relief: You’re absolutely correct that guidance on declaring foreign income and assets in Schedules FSI (Foreign Source Income), TR (Tax Relief), and FA (Foreign Assets) is essential for resident assessees with foreign income or assets. Additionally, pre-filing Form 67 to claim Double Taxation Avoidance Agreement (DTAA) relief is a critical step. I will consider adding a dedicated section to guide readers on these requirements, including timelines and documentation for Form 67. I have already posted about this in my previous artcle (LINK- https://taxguru.in/income-tax/schedule-fa-fsi-reporting-foreign-income-assets-income-tax-portal.html)
Salary and Business Income Declaration: Combining salary and business income in ITR-3 requires careful reporting, especially in Schedule BP and Schedule S. I agree that specific guidance on this would benefit readers, and I’ll aim to include examples of how to segregate and report these incomes accurately.
Form 10-IEA and Old Tax Regime Continuation: For assessees who filed Form 10-IEA in FY 23-24 to opt for the old tax regime and wish to continue in FY 24-25, clarity on confirming this choice in ITR-3 is important. I’ll ensure the article addresses the process of continuing the old regime and relevant ITR-3 entries.
Section 80GG Deduction and Form 10BA: Your point about including guidance on the Section 80GG deduction for rent paid (for assessees with business income not claiming HRA) and the requirement to pre-file Form 10BA is well-taken. I will incorporate this to highlight eligibility conditions and the pre-filing requirement.
LTCG on Equity Shares/Mutual Funds Purchased Before 31st January 2018: The grandfathering provisions for Long-Term Capital Gains (LTCG) on listed equity shares and equity-oriented mutual funds (STT paid) purchased before 31st January 2018, under Section 112A, are indeed significant. I’ll add guidance on computing LTCG using the Fair Market Value (FMV) as on 31st January 2018.
STCG Reporting and Budget 2024 Changes: The change in Short-Term Capital Gains (STCG) tax rates for specified financial assets (from 15% to 20% for sales on or after 23rd July 2024, as per Budget 2024) requires clear reporting in Schedule CG. I’ll include a section to differentiate reporting for sales before and after this date.
Section 87A Rebate Applicability: You’ve rightly pointed out that the Section 87A rebate is available only against normal income (up to ₹7 lakh in the new tax regime or ₹5 lakh in the old tax regime, after Chapter VI-A deductions) and not against LTCG taxed at special rates under Section 112A. I’ll clarify this distinction and elaborate on eligibility conditions.
Adjusting LTCG Against Basic Exemption Limit: The ability to set off LTCG against the remaining basic exemption limit (if normal income doesn’t exhaust it) is an important tax planning strategy. I’ll include guidance on how to compute and report this in ITR-3 to optimize tax liability.
Your suggestions significantly enhance the article’s scope and utility, and I will work on incorporating these points in a revised version or a follow-up article. Thank you again for your constructive feedback, and I invite you to share any further insights to make the content even more reader-friendly.
Best regards,
Sumit Agarwal
agarwaltaxconsultancy99@gmail.com
If you add Any other item in Schedule EI, exempt income, the online return failed to upload at the last stage.
hope they correct it soon