How to File ITR-3 — For Business and Professional Income, Partners, F&O and Intraday Traders and Crypto Businesses: Books or No Books, the Balance Sheet and P&L Schedules, Turnover and the ₹10 Crore Audit Test, Depreciation, Loss Carry-Forward and the Due Dates That Differ

ITR-3 is for individuals and HUFs with income from a business or profession — a proprietor with a shop or factory, a doctor, lawyer, architect or consultant, a commission agent, a freelancer who does not use presumptive taxation, a partner in a firm receiving remuneration or interest, and anyone with trading income that the law treats as business: futures and options, intraday equity, and crypto dealt in as a business. It carries every other head too — salary, house property, capital gains, other sources — so a salaried person who also trades F&O files ITR-3, not ITR-2. Presumptive income under 44AD/44ADA/44AE can also be declared inside ITR-3 (ITR-4 is the shorter alternative when nothing else disqualifies you).

1. 1Classify: F&O (equity, index, currency, commodity derivatives) is non-speculative business income; intraday equity (bought and sold the same day without delivery) is speculative business income; delivery-based equity is capital gains unless you trade like a business.
2. 2Turnover for F&O = the sum of absolute values of profits and losses on each trade (premium received on options sold is included where not already in the P&L); for intraday = sum of absolute daily profits and losses. Contract value is not turnover.
3. 3Audit under section 44AB: required if turnover exceeds ₹10 crore where cash receipts and cash payments are each within 5% of the totals (true for all exchange trades), else ₹1 crore; also required if you declare profit below the 44AD presumptive rate (6%) while your total income exceeds the basic exemption and you had opted for 44AD in any of the previous five years — the 'opt-out audit' trap.
4. 4Expenses: brokerage, exchange charges, STT (allowed as expense for business income, not for capital gains), data subscriptions, internet, a proportionate rent and depreciation on the computer — claim them against trading income with bills.
5. 5Losses: F&O losses set off against any income except salary in the year and carry forward eight years against business income; intraday (speculative) losses set off only against speculative gains and carry forward four years. Both need a return filed by the due date.
6. 6Report in ITR-3 with the P&L (or the no-account case), Schedule BP, and the AIS-reported trading data reconciled to the broker's tax P&L statement.

• •Keep books under section 44AA if income exceeds ₹2.5 lakh or turnover ₹25 lakh (₹1.5 lakh receipts for professions); cash book, ledger, bank book and stock records are what an assessing officer asks for.
• •Section 43B(h): amounts owed to micro and small suppliers not paid within 45 days (15 days without an agreement) by 31 March are disallowed in that year — check the creditor ageing before finalising.
• •Section 40A(3): cash expenses above ₹10,000 to one person in a day are disallowed; 269ST bars cash receipts of ₹2 lakh or more.
• •TDS compliance: if your turnover crossed ₹1 crore (₹50 lakh for professions) last year, you must deduct TDS on rent, contractors, professional fees and commission this year; expenses without TDS are 30% disallowed under 40(a)(ia).
• •Partner's remuneration is deductible to the firm within section 40(b) limits (₹3 lakh or 90% of the first ₹6 lakh of book profit, then 60%) and taxable to the partner in ITR-3; the share of profit is exempt.
• •Depreciation: additional 20% for new plant and machinery in manufacturing; the block method means a sold asset reduces the block, not a separate gain, until the block is exhausted.
• •Regime: business filers opt out of the new regime with Form 10-IEA before the due date and may return only once.