Form 3 of Income Tax Rules 2026: From Bonds to Compliance

Form 3 is prescribed under Rule 7 of the Income-tax Rules (as aligned with the Income-tax Bill, 2025). It must be furnished by:

• Infrastructure capital companies
• Infrastructure capital funds
• Infrastructure debt funds
• Public sector companies

that issue Zero Coupon Bonds (ZCBs) notified under Section 2(112) of the Income-tax Bill, 2025 (formerly Section 2(48) of the ITA 1961).

Purpose

Form 3 certifies, for each relevant tax year, the amount of funds actually invested out of the money realized through the issue of Zero Coupon Bonds, in accordance with the statutory investment timelines prescribed under Rule 7. 

This form enables verification of compliance with:

• Minimum investment thresholds
• Timelines for utilisation of ZCB proceeds
• Maintenance of a sinking fund (in case of Infrastructure Debt Funds)

It must be certified by an Accountant as defined under Section 515(3)(b) (analogous to Explanation to Section 288(2) of ITA 1961).

Who Should File Form 3?

Every entity that issues a Zero Coupon Bond notified by the Central Government must file this form for each tax year where utilization of ZCB proceeds is required to be reported.

This includes:

1. Infrastructure Capital Company
2. Infrastructure Capital Fund
3. Infrastructure Debt Fund (IDF)
4. Public Sector Company 

When Form 3 Must Be Filed?

Rule 7 mandates that Form 3 must be filed:

Within two months from the end of every tax year

• falling within the investment periods specified under Rule 7.

Those periods are:

For Infrastructure Capital Companies / Funds

• Minimum 25% of realization → by end of the tax year following the year of issue
• Remaining 75% → within four tax years thereafter

For Public Sector Companies

• Minimum 15% → by end of the tax year following the year of issue
• Remaining 85% → within six tax years thereafter 

For Infrastructure Debt Funds

Must additionally maintain a sinking fund for accrued interest and invest it in Government securities. Form 3 must certify compliance.

How Form 3 Is Filed?

Under Rule 7, Form 3 must be filed:

• Electronically, on the Income-tax portal
• Either under Digital Signature Certificate (DSC) or Electronic Verification Code (EVC)
• Including a UDIN, as applicable, for the accountant’s certificate

Structure of the Revised Form 3

The revised form is system-aligned, consistent with modern e-filing requirements, and contains the following sections: 

Particulars of the Issuer

• Name of the Infrastructure Capital Company / Fund / IDF / PSU
• PAN
• Category (tick box format)
• Date and Number of the Notification for the ZCB
• Date of Issue of the ZCB
• Amount realized through ZCB issue 

Details of Investments Out of ZCB Proceeds

A tabular section requiring:

• Name of Entity in which investment is made
• Nature of entity
• PAN / Aadhaar of the entity
• Address of the entity
• Nature of business
• Address / Location of project
• Project commencement dates:

1. Project commencement
2. Operations commencement
3. Commercial operations commencement

• Investment amounts across tax years (Tax Year 1–6)

The table supports:

• Multiple entities
• Multi-year investment reporting
• Public sector companies / other entities / IDFs

Sinking Fund Certification (Applicable Only to IDF)

mandatory certification (or strike-off) confirming:

• Maintenance of sinking fund
• Interest investment into Government securities 

Verification

Accountant must certify:

• Examination of books
• Correctness of investment details
• Compliance with Rule 7 timelines

Verification fields include:

• Name
• Registration number
• Address
• UDIN (if applicable) 

Legal Framework

Form 3 derives authority from:

Rule 7 – Guidelines for Notification of Zero Coupon Bonds

Key substantive references: 

The rule prescribes:

• Eligibility conditions for ZCB notification
• Investment utilization schedules
• Sinking fund requirement for IDFs
• Annual reporting via Form 3 

Key Functional Enhancements in Revised Form 3

System-related improvements:

• PAN-based pre-filling for issuer details
• Dropdowns for categories and entity types
• Tax Year–wise investment fields replacing earlier "financial year" structure
• Expandable table layout for multiple investment entities
• Digital verification including UDIN

Compliance-related improvements:

• Explicit separation of:

1. Project commencement
2. Operations commencement
3. Commercial operations completion

• Uniform formatting for officer / accountant details
• Mandatory strike-off instructions for IDFs 

Practical Guidance for Issuers

To ensure smooth filing:

Documentation to Maintain

• Bank statements for ZCB realizations
• Investment approval documents
• Project progress certificates
• Sinking fund ledger (for IDFs)
• Credit rating records
• Notification copy

Key Compliance Tips 

• Align investment schedules strictly with Rule 7
• Maintain year-wise records to populate Tax Year 1–6 accurately
• Ensure accountant’s UDIN is generated before filing
• Maintain consistency across years—discrepancies may trigger scrutiny
• File within two months of tax year-end to avoid non-compliance risk

Consequences of Non-Compliance

Failure to file Form 3 or non-fulfillment of Rule 7 conditions may result in:

• Withdrawal of ZCB notification under Rule 7
• Loss of tax benefits associated with notified Zero Coupon Bonds
• Exposure to reassessment / scrutiny
• Investor impact, especially for listed bonds

Summary

Form 3 is a critical compliance form that ensures transparent and timely monitoring of how Zero Coupon Bond proceeds are utilized.

The revised structure:

• Improves system compatibility
• Ensures clarity of investment tracking
• Strengthens regulatory controls through accountant verification

Issuers should ensure proper record-keeping and timely annual filing to maintain their ZCB notification status and associated tax advantages. 

FAQs

1. What is Form no. 3?

Form no. 3 is a certificate prescribed under rule 7 to certify utilisation of funds raised through notified Zero Coupon Bonds.

2. Who is required to file Form no. 3?

Every issuer of a notified Zero Coupon Bond, namely:

• Infrastructure capital company
• Infrastructure capital fund
• Infrastructure debt fund
• Public sector company

3. Is filing of Form no. 3 mandatory?

Yes. It is mandatory for each relevant tax year.

4. Who must certify Form no. 3?

An accountant as defined under section 515(3)(b) of the Act.

5. When should Form no. 3 be filed?

Within two months from the end of the relevant tax year.

6. How many times is Form no. 3 required to be filed?

It is year-specific and must be filed for each applicable tax year.

7. What information is reported in Form no. 3?

Issuer details, bond notification details, investments made, and year-wise utilisation.

8. Are there special requirements for Infrastructure Debt Funds?

Yes. Certification of maintenance of a sinking fund invested in Government securities.

9. Can Form no. 3 be filed offline?

No. It must be filed electronically.

10. Can Form no. 3 be revised after filing?

Revision is generally not permitted unless enabled by the system.

11. What documents should be maintained?

Bank statements, investment records, project progress reports, and sinking fund records.

12. What are the consequences of non-filing or incorrect filing?

Withdrawal of notification, loss of tax benefits, and possible statutory action.

13. Why is Form no. 3 important?

It ensures annual monitoring, compliance, and transparency in utilisation of ZCB proceeds.