Key changes in ITR Forms for AY 2021-22 - Part 2: ITR 3

Who is eligible to use ITR 3?

This Return Form is to be used by an individual or a Hindu Undivided Family who is having income under the head "profits or gains of business or profession" and who is not eligible to file Form ITR‐1 (Sahaj), ITR‐2 or ITR‐4 (Sugam).

Click here to read Part 1: Key Changes in ITR 1 Sahaj and ITR 2

Key Changes In Form ITR 3

(a) Option to avail benefit u/s 115BAC is provided in ITR.

(b) If new tax regime is opted, loss under the head House Property is not allowed to be set off and the following deductions/allowances cannot be claimed

1. Certain allowances u/s section 10 (LTA, HRA, allowances granted to meet expenses in performance of duties of office, Allowances granted to meet personal expenses in performance of duties of office, Allowance received by MP/MLA/MLC, Standard deduction in case of Minor child)
2. Deductions u/s16 (Standard Deduction, Entertainment allowance and Professional tax)
3. Interest payable on borrowed capital for self‐occupied property
4. Standard Deduction in case of family pension
5. Chapter VIA Deduction (life insurance, health insurance premium, pension funds, provident fund, donation etc. except Contribution made by employer to notified pension scheme u/s 80CCD (2))
6. Deduction u/s 10AA in respect of newly established Units in Special Economic Zones
7. Additional depreciation u/s 32(1)(iia)
8. Deduction u/s 32AD, 33AB,3ABA, 35AD,35CCC
9. Deduction under sub‐clause (ii) or sub‐clause (iia) or sub‐clause (iii) of sub‐ section (1) or sub‐section (2AA) of section 35

(c) Option of Filing ITR in response to notice u/s 153A and 153C is removed from ITR as the requirement to file ITR under these sections is omitted.

(d) In AY 2020‐21, the threshold limit for a person carrying on business was increased from one crore rupees to five crore rupees in cases where the cash receipts or payments by a business don’t exceed 5% of such receipts or such payments, however, in AY 2021‐22, the limit of five crore rupees is increased to ten crore rupees

(e) Loss (negative value) under "No books of account" at sl.no.65 in Sch P&L is restricted.

(f) In schedule BP, Income/ receipts credited to profit and loss account considered under head "other sources" has been bifurcated into 2 parts as

• "Dividend income" and
• "Other than dividend income"

(g) In Schedule DPM, the column "3a.Amount as adjusted on account of opting for taxation section 115BAC" and "3b. Adjusted Written down value on the first day of previous year (3) + (3a)" has been added . Hence corresponding mapping changes are made in schedule DPM

(h) CBDT vide notification dated 20th September 2019 increased depreciation to 45% on motor cars, motor buses etc wrt assets purchased on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020. Therefore, no additions will be allowed in the 45% block from the AY 2021‐22 w.r.t to such assets.

(i) In Schedule CG, the allowable difference between full value of consideration u/s. 50 C Instructions to Form ITR-3 (A.Y 2021-22) and value of property as per stamp authority has been increased from 1.05 times to 1.10 times

(j) In schedule OS,

The existing drop related to "Dividend income" is bifurcated into 2 parts i.e "Dividend income [other than (ii)]" and "Dividend income u/s 2(22)(e)" and respective changes are done in sl.no.2e _DTAA field and in sl.no.10(i)_Quarterly breakup of Dividend income.

Dividend will now be taxable from Rs.1/‐ as section 115BBDA is omitted. Accordingly, Interest expenditure u/s 57(1) to earn Dividend can be claimed at sl.no.3.

The existing drop down at Sl. No. 2d "115AD(1)(i)‐ Income received by an FII in respect of securities (other than units referred to in section115AB)" bifurcated into 2 drop downs as under:‐

• 115AD(1)(i)‐Income being Dividend received by an FII in respect of securities (other than units referred to in section115AB) @20%
• 115AD(1)(i)‐Income being other than dividend income received by an FII in respect of securities (other than units referred to in section115AB) @20%

Further new drop downs are inserted in sl. No. 2d and Sl. No. 2e wrt "Interest referred to in section 194LC(1)" and Distributed income being Dividend referred to in section 194LBA

Section 115BBDA is removed from AY 2021‐22 onwards, hence corresponding dropdowns are removed from sl. No. 2c, 2d and 2e of schedule OS and respective changes are done in sl.no.10(i)_Quarterly breakup of Dividend income.

In existing Sl. No. 10 "Information about accrual/receipt of income from Other Sources"

• Field "Dividend Income u/s 115BBDA" is changed to "Dividend income" due to finance Act changes
• New line item is inserted to capture the quarter wise break up of "Dividend income which is taxable at DTAA Rates". This information will be used to calculate interest u/s 234C.

(k) In Schedule CFL, the bifurcation of PTI loss and other than PTI loss has been removed from "HP loss", "Short term capital loss" and "Long term capital Loss"

(l) In Schedule CFL, the column "5b. Amount as adjusted on account of opting for taxation under section 115BAC" and "5c. Brought forward Business loss available for set off during the year" has been added . Hence corresponding mapping changes are made in schedule CFL

(m) In Schedule UD, "Amount as adjusted on account of opting for taxation under section 115BAD '' field has been added as an adjustment for 115BAC and so only balance loss can set off against income in Schedule BFLA.

(n) In schedule 80IB , the deductions claimed in following sections are removed due to sunset clause and corresponding mapping changes are made in schedule VI‐A

(i) Deduction in respect of industrial undertaking located in industrially backward states specified in Eighth Schedule [Section 80‐IB(4)]

(ii) Deduction in respect of industrial undertaking located in industrially backward districts [Section 80‐IB(5)]
(iii) Deduction in the case of an undertaking operating a cold chain facility [Section 80‐IB(11)]

(o) In Schedule EI, the field for "Dividend Income '' is removed from exempt income as for AY Instructions to Form ITR-3 (A.Y 2021-22) 2021‐22 onwards dividend income will be taxable in the hands of shareholders . similarly corresponding Changes are also made in schedule OS , schedule Pass Through Income (PTI) to remove reference of section 115O

(p) In schedule TPSA , dropdown for the financial year (FY 2019‐20 or FY 2020‐21) for which option u/s 92CE(2A) is exercised in AY 2021‐22 is inserted

(q) Schedule DI (Details of Investment) has been removed as it was relevant only for AY 20‐21

(r) Sl.No. 8 "Gross tax payable (higher of 1d and 7)" of Schedule Part B TTI has been bifurcated in below two fields

Sl.No. 8a - "Tax on income without including income on perquisites referred in section 17(2)(vi) received from employer, being an eligible start‐up referred to in section 80‐IAC ( Schedule Salary)"

Sl.No. 8b - "Tax deferred ‐ relatable to income on perquisites referred in section 17(2)(vi) received from employer, being an eligible start‐up referred to in section 80‐IAC"

Tax on ESOP received from eligible start‐up will be deferred and is payable by the assessee within fourteen days -

(i) after the expiry of forty‐eight months from the end of the relevant assessment year; or

(ii) from the date of the sale of such specified security or sweat equity share by the assessee; or

(iii) from the date of the assessee ceasing to be the employee of the employer who allotted or transferred him such specified security or sweat equity share, whichever is the earliest.

(s) Now, the assessee needs to disclose surcharge before "Marginal Relief" and after "Marginal relief" in Schedule Part BTTI.

(t) In Schedule TDS, earlier TDS credit is allowed only if corresponding income is being offered for tax this year , however an exception is being added for TDS u/s 194N. Also the label is amended to include form 16D for the claim of TDS

(u) Annexure 2 is inserted in instructions w.r.t. ITR fields which should be tallied with the corresponding amount mentioned in the Tax Audit report i.e Form 3CA‐3CD/3CB‐3CD, if applicable.

(v) Upload level validations table is modified w.r.t. mapping changes and new rules.