The Income Tax Department has officially released the new ITR-3 form for the Assessment Year 2025-26. This is an important update for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession. The new form was notified on 30th April 2025, and it comes with a few significant changes that aim to simplify the return filing process for business owners, professionals, and freelancers.
Let’s understand who needs to file ITR-3 and what updates have been made this year.
Who Should File ITR-3 Form?
The ITR-3 form is mainly meant for individuals and HUFs who:
- Earn income from business or professional services like doctors, lawyers, architects, or consultants.
- Work as proprietors or freelancers.
- Earn income from multiple sources like business, house property, capital gains, and other sources.
Note: If you are earning only from salary or interest from a firm, this form is not for you.
Major Changes Made in ITR-3 for AY 2025-26
This year, the Income Tax Department has introduced some useful changes in the ITR-3 form to make the return filing process more transparent and less stressful for middle-income taxpayers.
Here are the most important updates:
1. Asset Reporting Threshold Increased
Earlier, taxpayers had to declare their assets and liabilities under Schedule AL if their income exceeded ₹50 lakh. Now, the threshold has been increased to ₹1 crore.
Why this matters:
This move helps middle-class taxpayers by reducing the compliance burden. Only those earning above ₹1 crore now need to declare assets and liabilities in detail.
2. Capital Gains Split Based on Date
A new rule has been added for capital gains earned from real estate. Taxpayers now have to separately report capital gains depending on whether they occurred before or after 23rd July 2024.
Background:
In the July 2024 Budget, the government proposed 12.5% tax on long-term capital gains (LTCG) from property sales made after 23rd July 2024 (without indexation benefit). If you choose to use indexation (which adjusts for inflation), the tax remains at 20%.
What it means for you:
You now have two options when selling property:
- Pay 12.5% LTCG tax without indexation (for sales after July 23).
- Or choose the 20% rate with indexation to reduce your tax if the property value has risen due to inflation.
3. Buyback Loss Conditions Updated
From 1st October 2024, if you suffer a capital loss from listed share buybacks, you can claim it only if you have declared the related dividend income under the “income from other sources” section.
This update ensures better disclosure and accountability for share-related income and losses.
4. More Detailed Deduction Reporting
The ITR-3 form now asks for more breakup details under sections like:
- Section 80C (for investments like LIC, PPF, ELSS, etc.)
- Section 10(13A) (for House Rent Allowance – HRA)
Dropdown options have been introduced, making it easier for taxpayers to correctly select the right deductions and avoid errors.
5. TDS Section Codes Now Mandatory
Taxpayers must now mention TDS section codes like 194A (interest other than securities), 194H (commission), etc., in the Schedule-TDS section.
Why this matters:
This will help the Income Tax Department track TDS deductions accurately and match them with the taxpayer’s income records, reducing mismatches and refund delays.
Why These Changes Are Important for Taxpayers
According to Sandeep Sehgal, Partner-Tax at AKM Global, these updates improve transparency and make filing easier for professionals and business owners. Dropdowns for deductions and section-wise TDS reporting also reduce confusion.
If you are a freelancer, self-employed professional, or small business owner, understanding these changes can help you file your ITR correctly, avoid errors, and benefit from tax savings.
Prepare Early to File Smoothly
Now that the ITR-3 form is live, it’s best to start collecting your documents early. You’ll need:
- Income proof (balance sheets, invoices)
- Details of capital gains (especially property sales)
- Deduction proofs under 80C, 80D, etc.
- TDS certificates
- Bank account statements
The earlier you prepare, the easier it will be to file your return before the deadline and avoid a last-minute rush or penalties.
Source: Income Tax Department, PTI, AKM Global
