Important Keyword: Business and Profession Income, Income Heads, ITR Form, ITR-3.
Table of Contents
What is ITR-3 form?
The ITR-3 form is designed for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession. This form is also appropriate for those who receive income from a partnership firm or Limited Liability Partnership (LLP). Simply put, you need to file ITR 3 if your income falls under the category of “Profit or Gain of Business or Profession.” Additionally, it is used when a tax audit is required.
Up until FY 2018-19 (AY 2019-20), it wasn’t mandatory to file an Income Tax Return if your total income was below the basic exemption limit. However, the 2019 Budget introduced the seventh proviso to Section 139(1). According to this provision, taxpayers must file an ITR even if their total income does not exceed the basic exemption limit if they have engaged in certain high-value transactions. These transactions include:
Depositing more than INR 1 crore in a current account
The ITR-3 form is meant for individuals and Hindu Undivided Families (HUFs) who have income from various sources, including:
Partners in a Partnership Firm or LLP:
If you are a partner in a partnership firm or an LLP, you need to file ITR 3.
Income from Multiple Sources:
Individuals earning income from salary, house property, capital gains, and other sources, along with “Profits or Gains of Business or Profession,” must file ITR 3.
Non-Eligibility for Presumptive Taxation:
Those not eligible for the Presumptive Taxation Scheme under Section 44AD, 44ADA, or 44AE should use ITR 3.
Who Cannot File ITR-3?
The ITR-3 form cannot be used by certain entities, including:
Separate Legal Entities:
Partnership firms, LLPs, companies, and charitable trusts cannot file ITR-3. These entities have to use other specified forms suitable for their structure and income types.
Structure of ITR Form 3
Part/ Schedule
Heading
Fields
PART A- GENERAL
Personal Information
Name, Address, Date of Birth, PAN, contact details, etc.
Filing Status
Employer Category, Tax status, Residential status, Return filed under the section, etc.
PART B-TI
Computation of total income
PART B-TTI
Computation of tax liability on total income
The Bank Account details, Verification and TRP details (if any) are to be provided here
Schedule IT
Details of Advance Tax and Self Assessment Tax Payments
BSR code, Date of Deposit, Chalan number, Tax Paid
Schedule TDS
TDS1: Details of Tax Deducted at Source from SALARY
TAN of Employer, Employer Name, Tax Deducted, etc.
Schedule TDS
TDS2: Details of Tax Deducted at sources from Income other than Salary (As per FORM 16A)
TAN, Name of Deductor, Year of Deduction, Tax deducted, etc.
Schedule TDS
TDS3: Details of tax deducted at source on sale of immovable property u/s 194IA (Form 26QB)
PAN & Name of the Buyer, TDS-certificated Number, TDS Amount, etc.
Schedule TCS
Details of Tax Collected at Source (TCS) [As per Form 27D issued by the collector]
TDS/TCS Number of the Collector, Name of the Collector, Tax Collected, Amount being Claimed
Schedule S
Details of Income From Salary
Name and PAN of the Employer, Address of the Employer, Salary, Perquisites, Allowance, etc.
Schedule HP
Details of Income from House Property
Details of House Property, Name and PAN of the Co-owners and Tenants, Details of Rent Income, Interest payable on Borrowed Capital, etc.
Schedule IF
Information regarding partnership firm in which you are a partner
Name and PAN of the Firm, Whether the firm is liable to audit?, Percentage share in profit, Amount of share in the profit, Capital balance as on 31st March in the firm.
Schedule BP
Details of Income from Firm of which you are a partner
Salary, bonus, commission or remuneration, Interest received from the firm on capital, expenses, Net Income
Schedule CG
Capital Gains
Details about the Short term and Long term capital gains, Sales consideration, Cost of Acquisition, Deductions under section 54, 54B, 54EC, 54F, 54GB, etc.
Schedule OS
Income from Other Sources
Dividend, Interest, Rental Income from machinery, Winnings from lotteries, Crossword puzzles, Races, Games, etc.
Schedule CYLA
Details of income after setoff of current year losses
Schedule BFLA
Details of income after Set off of Brought Forward Losses of earlier years
Schedule CFL
Details of Losses to be carried forward to the future years
Schedule VI-A
Deductions under Chapter VI-A
Deductions under section 80C, 80CCC, 80CCG, 80D, 80DDB, 80E, 80G, 80TTA etc.
80G
Details of donations
Name of Donee, Address, city or district, state code, PAN of Donee, amount, etc.
Schedule SPI
The income of specified persons (spouse, minor child, etc.) included in the income of the assessee (income of the minor child, in excess of Rs. 1500 per child, to be included)
Name and PAN of person, relationship, nature of income, amount
Schedule SI
Income chargeable to income tax at special rates
Description of special rate income, Special rate, Income, Taxable income after adjusting min. chargeable to tax, Tax thereon
Schedule EI
Details of Exempt Income (Income not to be included in Total Income)
Interest income, Dividend, Agricultural income, etc.
Schedule FSI
Details of Income from outside India and tax relief
Country, Head of income, Income from outside India, Tax paid outside India, Tax payable in India, Relevant article of DTAA if relief is claimed u/s 90 or 90A.
Schedule TR
Summary of tax relief claimed for taxes paid outside India
Details of tax relief claimed
Schedule 5A
Information regarding the appointment of income between spouses governed by Portuguese Civil Code
Name and PAN of the spouse, Income received under different heads, Amount appointed in the hands of the spouse, TDS details, etc.
Schedule FA
Details of Foreign Assets and Income from any source outside India
Details of foreign bank accounts, financial interest in any entities, Immovable properties, Other Capital Assets, etc.
Schedule AL
Asset and Liability at the end of the year (other than those included in PART A – BS of the return of the firm in which you are a partner) [Applicable in a case where total income exceeds Rs. 25 Lakh]
Particulars of Assets and Liability
Filing your income tax return (ITR) is a crucial annual task, and understanding the process can sometimes feel overwhelming. To simplify things, let’s break down the essentials step by step.
Part A: General
When filling out your ITR-3 form, attention to detail is key. Ensure every section is completed as indicated. If a particular schedule or item doesn’t apply to you, mark it with “NA” or “Nil.” For negative figures or losses, precede the figure with a hyphen (-). All figures should be rounded off to the nearest rupee, but when it comes to total income, round off to the nearest multiple of ten rupees.
Sequence for Filling Parts and Schedules
Follow this sequence for a smooth filing process:
Part A- General
Schedules
Part B-TI and Part B-TTI
Verification
Details relating to TRP (Tax Return Preparer) and counter signature of TRP if applicable
Documents Needed to File ITR-3 Form
Gather these essential documents before starting:
PAN (Permanent Account Number)
Bank Account Details
TDS Certificates
Counterfoils of Taxes Paid
Details of Original Return if Filing Revised Return
Details of Notice if Filing in Response to a Notice
Additionally, prepare documents based on your income type:
Salary Income: Form-16 or Salary Slips from your employer, and Pension Statement/Passbook.
Other Sources: Savings/current account statements, interest certificates, dividend warrants, rent agreements (for let-out machinery), and details of any other income receipts.
Capital Gains: Documents such as sales and purchase deeds, contract notes, cost of purchase, improvement costs, and details of expenses incurred on the transfer of capital assets.
How to File ITR-3?
You have two options: physical submission or electronic filing. Since the financial year 2013-14, electronic filing has been compulsory for taxpayers with incomes exceeding INR 5 lakhs.
For Physical Submission:
Submit the ITR-3 in paper form or a bar-coded return form.
The department will provide you with an acknowledgment stamped with the submission details.
For Online/Electronic Submission:
Submit the ITR-3 online after digitally signing it, or submit it online and send the signed verification (ITR-V) to the Central Processing Center, Bangalore, within 120 days.
Alternatively, use the e-verification option to avoid sending the ITR-V and streamline the process.
Sample ITR 3 Form AY 2021-22
Major Changes in ITR 2 for AY 2021-22
Taxpayers now have the option to choose between the old and new tax regimes. Additionally, dividend income must be added with quarterly breakdowns for accurate calculation of interest under Section 234C.
Filing your ITR shouldn’t be daunting. With this simplified guide, you’re equipped to navigate the process smoothly.
Important Keyword: Aadhaar, Business and Profession Income, Capital Gains, Income from House Property, Income Source, ITR Documents, ITR Form, Salary Income, Tax Saving Investments.
Table of Contents
Documents required for Income Tax Return filing in India
Income Tax Return (ITR) forms vary depending on the taxpayer’s sources of income. Specific documents are necessary for filing the ITR.
Additional documents required may vary depending on the taxpayer’s income situation. These documents do not need to be submitted to the Income Tax Department during the filing of the Income Tax Return since ITR forms are annexure-less. However, if a taxpayer receives a notice from the Income Tax Department, such documents may be required to be submitted.
List of Basic Documents required for filing the Income Tax Return – ITR
Here’s a breakdown of the essential documents required for filing an Income Tax Return (ITR) in India, based on different income heads:
Salary Income/ Pension Income:
Form 16
Salary Slips (if Form 16 is unavailable)
Pension Statement/ Passbook
House Property Income:
Property Address
Rent Agreement
Co-ownership details for co-owned property
Municipal Tax Receipts
Form 16A (if TDS is deducted on rental income)
Home loan repayment certificate/ Interest Certificate from the bank
Pre-Construction Interest Details
Capital Gains Income:
Sales and Purchase deed, stamp duty valuation (for sale of land/ building)
Details of Improvement cost
Details of expenses related to the transfer of capital assets
Proof of cost of the asset, cost of improvement, and sales receipts (for movable assets)
Details of investments made to claim exemptions
Capital Gains Deposit Account details (if applicable)
For shares & securities: Trading statement/ Stock Ledger/ Contract Notes
Business and Professional Income:
Balance Sheet and Profit & Loss Statement
Bank Account Statement/ Passbook
Supporting documents for expenses incurred
Cash Register
Any other documents required to maintain business & profession books of accounts
Audit Report (if profit from business is less than 8% of Total Turnover)
Income from Other Sources:
Total interest income earned from savings/ current account
Interest certificate from deposits/ Bonds/ NSC
PPF Account Statement/ Passbook
Dividend Warrants/ counterfoils
Proof of details of receipt of any other incomes
Rent Agreement (in case of let out machinery)
These documents provide comprehensive support for accurate tax filing across various income categories.
Documents Required for Tax Saving Investments (Section 80)
For individuals seeking tax-saving investment opportunities, certain documents play a crucial role in claiming deductions. Here’s a list of documents essential for tax-saving investments:
ELSS/ ULIP/ NSC Investment Details:
Documents confirming investment in Equity Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIP), or National Savings Certificate (NSC).
PPF Account Passbook/ Statement:
Passbook or statement reflecting transactions and balances in the Public Provident Fund (PPF) account.
Life/Medical Insurance Receipts:
Receipts or premium payment details for life insurance policies or medical insurance plans.
Details of Tax-Saving FD:
Information related to investments in Tax-Saving Fixed Deposits, including deposit receipts and interest certificates.
National Pension Scheme Investment Details:
Documentation supporting contributions made to the National Pension Scheme (NPS).
Senior Citizen Saving Scheme Investment Details:
Documentation pertaining to investments in the Senior Citizen Saving Scheme (SCSS).
Donation Receipts:
Receipts or certificates acknowledging donations made to eligible charitable organizations.
Children Tuition Fees Paid Receipts:
Receipts confirming payment of tuition fees for children’s education.
Repayment Certificate for Home Loan/ Education Loan:
Certificate or statement from the lending institution confirming repayment of home loan or education loan, eligible for tax deduction.
Certificate from Specified Medical Authorities in Case of Disability:
Certification from designated medical authorities validating disability for claiming tax benefits.
Receipts/Proof of Any Other Tax-Saving Investments/Contributions:
Supporting documents for other tax-saving investments or contributions made during the financial year.
Documents Required for Foreign Income and Foreign Investments:
Details of foreign income earned and taxes deducted, if applicable.
Information regarding assets held outside India, including foreign bank accounts.
These documents serve as evidence of tax-saving investments and contributions, facilitating the process of claiming deductions while filing income tax returns.
Important Keyword: Business and Profession Income, Capital Gains, Income from House Property, Income Source.
Table of Contents
Set Off and Carry Forward Losses
Setting off and carrying forward losses is a vital strategy for individuals and businesses alike when they encounter financial setbacks. This approach allows them to utilize these losses to diminish their tax obligations, thereby turning adversity into opportunity. By leveraging this strategy, taxpayers can navigate challenging financial circumstances more effectively, making it a crucial aspect of income tax planning.
Basics of Carry forward and Set off of losses
Taxpayers have the flexibility to offset losses against their income for the current year. If any losses remain unutilized, they can carry them forward to subsequent years to offset against future income. It’s worth noting that if taxpayers fail to file their Income Tax Return (ITR) within the stipulated deadline under Section 139(1), they forfeit the opportunity to carry forward losses to future years, except for losses under the head “Income from House Property.” However, even if they file a belated ITR, they can still carry forward losses under this category to future years.
Set Off Losses
Intra-Head Set Off of Loss:
Intra-head set-off entails offsetting losses against income within the same category. This means losses from a specific source within a particular category can be adjusted against income from another source within that same category. For instance, if there’s a loss from a self-occupied property but profit from another rented house property, you can use the losses to offset the income from the profitable property.
Inter-Head Set Off of Loss:
Inter-head set-off involves adjusting losses from one income category against profits from another income category. Therefore, if a taxpayer incurs losses in one income category but earns positive income in another, those losses can be offset against the income. For example, you could set off losses from a self-occupied house property against income from salary. However, before applying inter-head set-off, the taxpayer must first utilize intra-head set-off.
Methodology of set-off of losses for each head
Business (PGBP) Loss:
Non-Speculative Business Loss: Can be set off against any income except salary income.
Speculative Business Loss: Can be adjusted against only Speculative Business Profit.
Loss under Capital Gains:
Short-term capital loss: Can be adjusted against short-term and long-term capital gains.
Long-term capital losses: Can be adjusted against long-term capital gains only.
Capital gains losses can only be set off against capital gains and not with any other income.
House Property Loss:
Loss from house property: Can be set off against any other income.
Set off of losses can be done up to INR 2,00,000 for a particular assessment year.
Loss from trading in Cryptocurrency and other Virtual Digital Assets (VDA):
Losses from the transfer of cryptocurrency, NFT, or VDA: Cannot be set off against any other income.
Losses from other heads can be set off against profit on the transfer of cryptocurrency, NFT, or VDA.
Horse-Race Loss:
Losses from the business of owning and maintaining racehorses: Cannot be set off against any income other than income from the business of owning and maintaining racehorses.
Specified Business Loss:
Losses from businesses specified under section 35AD: Can be adjusted against income from specified businesses only.
Losses from other businesses and professions can be set off against specified business losses.
Loss from Gambling or betting:
Losses from winnings from lotteries, crossword puzzles, horse races, card games, and games having gambling or betting: Cannot be set off against any income.
Example of Set-Off Loss:
Non-Speculative Business Loss: INR 5,00,000 Speculative Business Income: INR 1,00,000 House Property Income: INR 2,50,000
Solution:
Taxpayers can set off Non-Speculative Business Loss in the following order:
Speculative Business Income (Intra-head set off): INR 1,00,000
House Property Income (Inter-head set off): INR 2,50,000
Carry Forward Loss to future years: INR 1,50,000 (5,00,000 – 1,00,000 – 2,50,000)
Carry Forward Losses
Loss remaining after set-off refers to the portion of the loss that taxpayers can carry forward to future years to offset against future incomes. For instance, if there is a loss from self-occupied house property remaining after intra-head and inter-head set-off, the taxpayer can carry it forward for up to 8 years and adjust it against future income from house property.
To carry forward the loss to future years, taxpayers must file the Original Income Tax Return (ITR) within the due date as per Section 139(1). However, even if taxpayers file a Belated ITR under Section 139(4), they can still carry forward loss under the head House Property to future years. Below is a table outlining the rules for carrying forward and setting off losses against future incomes:
Example for Carry Forward of Loss:
FY 2021-22 (AY 2022-23)
Non-Speculative Business Loss: INR 5,00,000
Speculative Business Income: INR 1,00,000
House Property Income: INR 2,50,000
FY 2022-23 (AY 2023-24)
Speculative Business Income: INR 30,000
Non-Speculative Business Income: INR 1,40,000
Solution:
FY 2021-22 (AY 2022-23)
The taxpayer can set off Non-Speculative Business Loss in the following order:
Speculative Business Income (Intra-head set off) – INR 1,00,000
House Property Income (Inter-head set off) – INR 2,50,000
Carry Forward Loss to future years – INR 1,50,000 (5,00,000 – 1,00,000 – 2,50,000)
FY 2022-23 (AY 2023-24)
The taxpayer can set off Non-Speculative Business Loss in the following order:
Carry Forward Loss – INR 1,50,000
Non-Speculative Business Income – INR 1,40,000
Speculative Business Income – INR 10,000
Carry Forward and Set Off Business Loss
Non-speculative business loss:
Taxpayers can carry forward Non-Speculative Business Loss remaining after set off for up to 8 assessment years. These losses can be set off against incomes under the head ‘Profits and Gains from Business and Profession.’
Speculative business loss:
Losses from speculative business can be carried forward for 4 years. However, these brought-forward losses can only be adjusted against speculative business incomes.
Specified business loss:
There is no time restriction for carrying forward losses from specified business. These brought-forward losses can be adjusted against specified business incomes only.
Owing and maintaining racehorses
The taxpayer can carry forward losses from owning and maintaining racehorses for up to 4 years. However, they can only adjust these losses against the profits earned specifically from owning and maintaining the racehorses.
Carry Forward and Set Off of House Property Loss
The taxpayer has the option to carry forward and set off losses from House Property for a duration of 8 assessment years. Moreover, this carry forward of losses is permissible even if the Income Tax Return (ITR) is filed after the due date specified under section 139(1).
In the subsequent financial years, these carried forward House Property Losses can be set off against any income generated from House Property.
Carry Forward and Set Off of Capital Loss
The taxpayer has the provision to carry forward losses under the head of ‘Capital Gains’ for up to 8 assessment years, provided that they have filed their Income Tax Return (ITR) before the due date as specified under section 139(1).
In the subsequent financial years, the taxpayer can utilize the carried forward Short Term Capital Loss (STCL) to offset both Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG). However, the carried forward Long Term Capital Loss (LTCL) can only be set off against Long Term Capital Gains (LTCG).
Carry Forward and Set Off of Crypto Loss
As per the amendments introduced in Budget 2022, significant changes have been made to the taxation of cryptocurrency, NFTs, and other virtual digital assets (VDA). One notable change is regarding the treatment of losses incurred from the transfer of these assets.
Under the new provisions, taxpayers are no longer permitted to offset losses from the transfer of one virtual digital asset against profits from the transfer of another VDA or any other form of income. Additionally, the option to carry forward such losses to subsequent years for set-off against future income has been eliminated.
Furthermore, if a taxpayer experiences a loss under any other income head, they are prohibited from using it to offset profits generated from the transfer of virtual digital assets. These changes represent a significant shift in the tax treatment of cryptocurrency and other similar assets, highlighting the evolving regulatory landscape in this space.
Treatment of Loss as per New Tax Regime
With the implementation of Section 115BAC in Budget 2020, several changes were introduced in the treatment of losses under the income tax regime. Here’s a breakdown of the key modifications:
House Property Loss: Under the new tax regime, taxpayers can only set off the current year’s loss from house property against income derived from house property itself. Importantly, they are prohibited from offsetting house property losses against any other form of income. Moreover, if taxpayers opt for the new tax regime, they cannot carry forward house property losses to subsequent years.
Set Off Business and Profession Loss: In the scenario of business income, individuals or Hindu Undivided Families (HUFs) are restricted from setting off brought forward business losses or unabsorbed depreciation. Furthermore, they cannot carry forward these losses or unabsorbed depreciation if they are associated with deductions or exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC.
In essence, under the new tax regime, taxpayers can carry forward short-term and long-term capital losses, as well as derivatives trading losses. However, losses such as house property losses and additional depreciation, which are invalidated under Section 115BAC(2)(i), cannot be set off or carried forward.
This distinction between the treatment of losses in the new and old tax regimes is illustrated in the accompanying image, providing a clearer understanding of the changes introduced.
Important Keyword: Business and Profession Income, ITR-3, ITR-4
Table of Contents
Business and Profession Codes
In India, businesses and professions span a diverse spectrum, each requiring specific categorization for tax purposes. To ensure accurate classification, the income tax department has established a comprehensive list of business and profession codes. Taxpayers must diligently select the relevant code when filing their income tax returns. Incorrect reporting or omission of this code could prompt the tax department to issue a notice seeking clarification. Therefore, meticulous attention to this detail is essential to maintain compliance with tax regulations.
The Central Board of Direct Taxes (CBDT) has delineated specific business and profession codes for the purpose of Income Tax Return (ITR) filing. These codes are organized into distinct categories, including business income governed by Section 44AD, Section 44ADA, Section 44AE, and other businesses.
For taxpayers not opting for the Presumptive Taxation Scheme, the appropriate course of action is to compile financial statements and file ITR-3. During this process, it’s crucial to accurately select the relevant codes and category from the provided drop-down list. Additionally, taxpayers have the option to furnish details such as a description of the business or profession activity and the Trade Name associated with the business or profession. This meticulous approach ensures adherence to regulatory requirements and facilitates seamless tax compliance.
For taxpayers opting for the Presumptive Taxation Scheme under Section 44AD or 44ADA and earning income from business or profession, the process is simplified. They are exempted from the obligation of maintaining books of accounts and are required to file ITR-4.
During the filing process, it’s imperative for the taxpayer to accurately choose the relevant codes and category from the provided drop-down list. Additionally, they have the option to provide details such as a description of the business or profession activity and the Trade Name associated with their enterprise. This meticulous approach ensures adherence to regulatory guidelines and facilitates smooth tax compliance for taxpayers availing themselves of the Presumptive Taxation Scheme.
List of Codes for Professions
Select the code from the list below in case of Income from Profession under ITR-3 or for opting for Presumptive Taxation Scheme under Sec 44ADA under ITR-4.
Sub-Sector
Code
Software development
14001
Other software consultancy
14002
Data processing
14003
Database activities and distribution of electronic content
14004
Other IT enabled services
14005
BPO services
14006
Maintenance and repair of office, accounting and computing machinery
14008
Legal profession
16001
Accounting, book-keeping and auditing profession
16002
Tax consultancy
16003
Architectural profession
16004
Engineering and technical consultancy
16005
Fashion designing
16007
Interior decoration
16008
Photography
16009
Business and management consultancy activities
16013
Secretarial activities
16018
Medical Profession
16019_1
Film Artist
16020
General hospitals
18001
Speciality and super speciality hospitals
18002
Nursing homes
18003
Diagnostic centres
18004
Pathological laboratories
18005
Medical clinics
18010
Dental practice
18011
Ayurveda practice
18012
Unani practice
18013
Homeopathy practice
18014
Nurses, physiotherapists or other para-medical practitioners
18015
Veterinary hospitals and practice
18016
Medical education
18017
Medical research
18018
Practice of other alternative medicine
18019
Other healthcare services
18020
Individual artists excluding authors
20010
Literary activities
20011
Other cultural activities n.e.c.
20012
List of Codes for Businesses
Select the code from the list below in case of Income from Business under ITR-3 or for opting for the Presumptive Taxation Scheme under Sec 44AD under ITR-4.
Agricultural, Animal, Husbandry & Forestry
Sub-Sector
Code
Growing and manufacturing of tea
01001
Growing and manufacturing of coffee
01002
Growing and manufacturing of rubber
01003
Market gardening and horticulture specialties
01004
Raising of silk worms and production of silk
01005
Raising of bees and production of honey
01006
Raising of poultry and production of eggs
01007
Rearing of sheep and production of wool
01008
Rearing of animals and production of animal products
01009
Agricultural and animal husbandry services
01010
Soil conservation, soil testing and soil desalination services
01011
Hunting, trapping and game propagation services
01012
Growing of timber, plantation, operation of tree nurseries and conserving of forest
01013
Gathering of tendu leaves
01014
Gathering of other wild growing materials
01015
Forestry service activities, timber cruising, afforestation and reforestation
01016
Logging service activities, transport of logs within the forest
01017
Other agriculture, animal husbandry or forestry activity n.e.c
01018
Fish Farming
Sub-Sector
Code
Fishing on commercial basis in inland waters
02001
Fishing on commercial basis in ocean and coastal areas
02002
Fish farming
02003
Gathering of marine materials such as natural pearls, sponges, coral etc.
02004
Services related to marine and fresh water fisheries, fish hatcheries and fish farms
02005
Other Fish farming activity n.e.c
02006
Mining and Quarrying
Sub-Sector
Code
Mining and agglomeration of hard coal
03001
Mining and agglomeration of lignite
03002
Extraction and agglomeration of peat
03003
Extraction of crude petroleum and natural gas
03004
Service activities incidental to oil and gas extraction excluding surveying
03005
Mining of uranium and thorium ores
03006
Mining of iron ores
03007
Mining of non-ferrous metal ores, except uranium and thorium ores
03008
Mining of gemstones
03009
Mining of chemical and fertilizer minerals
03010
Mining of quarrying of abrasive materials
03011
Mining of mica, graphite and asbestos
03012
Quarrying of stones (marble/granite/dolomite), sand and clay
03013
Other mining and quarrying
03014
Mining and production of salt
03015
Other mining and quarrying n.e.c
03016
Manufacturing
Sub-Sector
Code
Production, processing and preservation of meat and meat products
04001
Production, processing and preservation of fish and fish products
04002
Manufacture of vegetable oil, animal oil and fats
04003
Processing of fruits, vegetables and edible nuts
04004
Manufacture of dairy products
04005
Manufacture of sugar
04006
Manufacture of cocoa, chocolates and sugar confectionery
04007
Flour milling
04008
Rice milling
04009
Dal milling
04010
Manufacture of other grain mill products
04011
Manufacture of bakery products
04012
Manufacture of starch products
04013
Manufacture of animal feeds
04014
Manufacture of other food products
04015
Manufacturing of wines
04016
Manufacture of beer
04017
Manufacture of malt liquors
04018
Distilling and blending of spirits, production of ethyl alcohol
04019
Manufacture of mineral water
04020
Manufacture of soft drinks
04021
Manufacture of other non-alcoholic beverages
04022
Manufacture of tobacco products
04023
Manufacture of textiles (other than by handloom)
04024
Manufacture of textiles using handlooms (khadi)
04025
Manufacture of carpet, rugs, blankets, shawls etc. (other than by hand)
04026
Manufacture of carpet, rugs, blankets, shawls etc. by hand
04027
Manufacture of wearing apparel
04028
Tanning and dressing of leather
04029
Manufacture of luggage, handbags and the like saddler and harness
04030
Manufacture of footwear
04031
Manufacture of wood and wood products, cork, straw and plaiting material
04032
Manufacture of paper and paper products
04033
Publishing, printing and reproduction of recorded media
04034
Manufacture of coke oven products
04035
Manufacture of refined petroleum products
04036
Processing of nuclear fuel
04037
Manufacture of fertilizers and nitrogen compounds
04038
Manufacture of plastics in primary forms and of synthetic rubber
04039
Manufacture of paints, varnishes and similar coatings
04040
Manufacture of pharmaceuticals, medicinal chemicals and botanical products
04041
Manufacture of soap and detergents
04042
Manufacture of other chemical products
04043
Manufacture of man-made fibers
04044
Manufacture of rubber products
04045
Manufacture of plastic products
04046
Manufacture of glass and glass products
04047
Manufacture of cement, lime and plaster
04048
Manufacture of articles of concrete, cement and plaster
04049
Manufacture of Bricks
04050
Manufacture of other clay and ceramic products
04051
Manufacture of other non-metallic mineral products
04052
Manufacture of pig iron, sponge iron, Direct Reduced Iron etc.
04053
Manufacture of Ferro alloys
04054
Manufacture of Ingots, billets, blooms and slabs etc.
04055
Manufacture of steel products
04056
Manufacture of basic precious and non-ferrous metals
04057
Manufacture of non-metallic mineral products
04058
Casting of metals
04059
Manufacture of fabricated metal products
04060
Manufacture of engines and turbines
04061
Manufacture of pumps and compressors
04062
Manufacture of bearings and gears
04063
Manufacture of ovens and furnaces
04064
Manufacture of lifting and handling equipment
04065
Manufacture of other general purpose machinery
04066
Manufacture of agricultural and forestry machinery
04067
Manufacture of Machine Tools
04068
Manufacture of machinery for metallurgy
04069
Manufacture of machinery for mining, quarrying and constructions
04070
Manufacture of machinery for processing of food and beverages
04071
Manufacture of machinery for leather and textile
04072
Manufacture of weapons and ammunition
04073
Manufacture of other special purpose machinery
04074
Manufacture of domestic appliances
04075
Manufacture of office, accounting and computing machinery
04076
Manufacture of electrical machinery and apparatus
04077
Manufacture of Radio, Television, communication equipment and apparatus
04078
Manufacture of medical and surgical equipment
04079
Manufacture of industrial process control equipment
04080
Manufacture of instruments and appliances for measurements and navigation
04081
Manufacture of optical instruments
04082
Manufacture of watches and clocks
04083
Manufacture of motor vehicles
04084
Manufacture of body of motor vehicles
04085
Manufacture of parts and accessories of motor vehicles and engines
04086
Building and repair of ships and boats
04087
Manufacture of railway locomotive and rolling stocks
04088
Manufacture of aircraft and spacecraft
04089
Manufacture of bicycles
04090
Manufacture of other transport equipment
04091
Manufacture of furniture
04092
Manufacture of jewellery
04093
Manufacture of sports goods
04094
Manufacture of musical instruments
04095
Manufacture of games and toys
04096
Other manufacturing n.e.c.
04097
Recycling of metal waste and scrap
04098
Recycling of non- metal waste and scrap
04099
Electricity, Gas and Water
Sub-Sector
Code
Production, collection and distribution of electricity
05001
Manufacture and distribution of gas
05002
Collection, purification and distribution of water
05003
Other essential commodity service n.e.c
05004
Construction
Sub-Sector
Code
Site preparation works
06001
Building of complete constructions or parts- civil contractors
06002
Building installation
06003
Building completion
06004
Construction and maintenance of roads, rails, bridges, tunnels, ports, harbour, runways etc.
06005
Construction and maintenance of power plants
06006
Construction and maintenance of industrial plants
06007
Construction and maintenance of power transmission and telecommunication lines
06008
Construction of water ways and water reservoirs
06009
Other construction activity n.e.c.
06010
Real Estate and Renting Services
Sub-Sector
Code
Purchase, sale and letting of leased buildings (residential and non-residential)
07001
Operating of real estate of self-owned buildings (residential and non-residential)
07002
Developing and sub-dividing real estate into lots
07003
Real estate activities on a fee or contract basis
07004
Other real estate/renting services n.e.c
07005
Renting of Machinery
Sub-Sector
Code
Renting of land transport equipment
08001
Renting of water transport equipment
08002
Renting of air transport equipment
08003
Renting of agricultural machinery and equipment
08004
Renting of construction and civil engineering machinery
08005
Renting of office machinery and equipment
08006
Renting of other machinery and equipment n.e.c.
08007
Renting of personal and household goods n.e.c.
08008
Renting of other machinery n.e.c.
08009
Wholesale and Retail Trade
Sub-Sector
Code
Wholesale and retail sale of motor vehicles
09001
Repair and maintenance of motor vehicles
09002
Sale of motor parts and accessories- wholesale and retail
09003
Retail sale of automotive fuel
09004
Wholesale of agricultural raw material
09006
Wholesale of food and beverages and tobacco
09007
Wholesale of household goods
09008
Wholesale of metals and metal ores
09009
Wholesale of household goods
09010
Wholesale of construction material
09011
Wholesale of hardware and sanitary fittings
09012
Wholesale of cotton and jute
09013
Wholesale of raw wool and raw silk
09014
Wholesale of other textile fibres
09015
Wholesale of industrial chemicals
09016
Wholesale of fertilizers and pesticides
09017
Wholesale of electronic parts and equipment
09018
Wholesale of other machinery, equipment and supplies
09019
Wholesale of waste, scrap and materials for re-cycling
09020
Retail sale of food, beverages and tobacco in specialized stores
09021
Retail sale of other goods in specialized stores
09022
Retail sale in non-specialized stores
09023
Retail sale of textiles, apparel, footwear, leather goods
09024
Retail sale of other household appliances
09025
Retail sale of hardware, paint, and glass
09026
Wholesale of other products n.e.c
09027
Retail sale of other products n.e.c
09028
Hotels, Restaurants and Hospitality Services
Sub-Sector
Code
Hotels – Star rated
10001
Hotels – Non-star-rated
10002
Motels, Inns and Dharmshalas
10003
Guest houses and circuit houses
10004
Dormitories and hostels at educational institutions
10005
Short stay accommodations n.e.c.
10006
Restaurants – with bars
10007
Restaurants – without bars
10008
Canteens
10009
Independent caterers
10010
Casinos and other games of chance
10011
Other hospitality services n.e.c.
10012
Transport & Logistics Services
Sub-Sector
Code
Travel agencies and tour operators
11001
Packers and movers
11002
Passenger land transport
11003
Air transport
11004
Transport by urban/sub-urban railways
11005
Inland water transport
11006
Sea and coastal water transport
11007
Freight transport by road
11008
Freight transport by railways
11009
Forwarding of freight
11010
Receiving and acceptance of freight
11011
Cargo handling
11012
Storage and warehousing
11013
Transport via pipelines (transport of gases, liquids, slurry and other commodities)
11014
Other Transport and Logistics services n.e.c
11015
Post and Telecommunication Services
Sub-Sector
Code
Post and courier activities
12001
Basic telecom services
12002
Value added telecom services
12003
Maintenance of telecom network
12004
Activities of the cable operators
12005
Other Post and Telecommunication services n.e.c
12006
Financial Intermediation Services
Sub-Sector
Code
Commercial, saving banks and discount houses
13001
Specialized institutions granting credit
13002
Financial leasing
13003
Hire-purchase financing
13004
Housing finance activities
13005
Commercial loan activities
13006
Credit cards
13007
Mutual funds
13008
Chit fund
13009
Investment activities
13010
Life insurance
13011
Pension funding
13012
Non-life insurance
13013
Administration of financial markets
13014
Stockbrokers, sub-brokers and related activities
13015
Financial advisers, Mortgage advisers, and brokers
13016
Foreign exchange services
13017
Other financial intermediation services n.e.c
13018
Computer and Related Services
Sub-Sector
Code
Cybercafe
14007
Computer training and educational institutes
14009
Other computation related services n.e.c
14010
Research and Development
Sub-Sector
Code
Natural sciences and engineering
15001
Social sciences and humanities
15002
Other Research & Development activities n.e.c.
15003
Professions
Sub-Sector
Code
Advertising
16006
Auctioneers
16010
Market research and public opinion polling
16012
Labour recruitment and provision of personnel
16014
Investigation and security services
16015
Building-cleaning and industrial cleaning activities
16016
Packaging activities
16017
Other professional services n.e.c.
16019
Education Services
Sub-Sector
Code
Primary education
17001
Secondary/senior secondary education
17002
Technical and vocational secondary/senior secondary education
17003
Higher education
17004
Education by correspondence
17005
Coaching centers tuitions
17006
Other education services n.e.c
17007
Health Care and Services
Sub-Sector
Code
Independent blood banks
18006
Medical transcription
18007
Independent ambulance services
18008
Medical suppliers, agencies and stores
18009
Social and Community Work
Sub-Sector
Code
Social work activities with accommodation (orphanages and old age homes)
19001
Social work activities without accommodation (Creches)
19002
Industry associations, chambers of commerce
19003
Professional organisations
19004
Trade unions
19005
Religious organizations
19006
Political organisations
19007
Other membership organisations n.e.c. (rotary clubs, book clubs and philatelic clubs)
19008
Other Social or community service n.e.c
19009
Culture and Sport
Sub-Sector
Code
Motion picture production
20001
Film distribution
20002
Film laboratories
20003
Television channel productions
20004
Television channels broadcast
20005
Video production and distribution
20006
Sound recording studios
20007
Radio – recording and distribution
20008
Stage production and related activities
20009
Circuses and race tracks
20013
Video Parlours
20014
News agency activities
20015
Library and archives activities
20016
Museum activities
20017
Preservation of historical sites and buildings
20018
Botanical and zoological gardens
20019
Operation and maintenance of sports facilities
20020
Activities of sports and game schools
20021
Organisation and operation of indoor/outdoor sports and promotion and production of sporting events
20022
Sports Management
20023_1
Other sporting activities n.e.c.
20023
Other recreational activities n.e.c.
20024
Other Services
Sub-Sector
Code
Hairdressing and other beauty treatment
21001
Funeral and related activities
21002
Marriage bureaus
21003
Pet care services
21004
Sauna and steam baths, massage salons, etc.
21005
Astrological and spiritualists’ activities
21006
Private households as employers of domestic staff
21007
Event Management
21008_1
Other services n.e.c
21008
Extra-Territorial Organizations and Bodies
Sub-Sector
Code
Extraterritorial organizations and bodies (IMF, World Bank, European Commission, etc.)
22001
Businesses opting for Section 44AE
Select the code from the list below in case of Income from Business under ITR-3 or for opting for Presumptive Taxation Scheme under Sec 44AE under ITR-4.
Renting of Machinery
Sub-Sector
Code
Renting of land transport equipment
08001
Transport & Logistic Services
Sub-Sector
Code
Packers and movers
11002
Freight transport by road
11008
Forwarding of freight
11010
Receiving and acceptance of freight
11011
Cargo handling
11012
Other Transport and Logistics services n.e.c
11015
Other codes for Business & Professions
In addition to the above-mentioned codes, below are other codes that can be opted for by such businesses for commission or brokerage income.
Wholesale & Retail Trade
Sub-Sector
Code
General commission agents, commodity brokers and auctioneers
Important Keyword: Business and Profession Income, Income Tax Rates, STT, Trading Income.
Table of Contents
STT: Securities Transaction Tax
Before the introduction of the Securities Transaction Tax (STT), tax evasion was a concern as trading transactions often went unreported. In response, the Finance Act of 2004 introduced STT. The primary objective of this tax was to curb tax evasion related to capital gains derived from stock sales. Additionally, STT aimed to promote fairness and transparency in the collection of taxes from financial market transactions. By levying STT, authorities sought to ensure that all transactions in the securities market were accounted for, thus minimizing opportunities for tax evasion and enhancing overall tax compliance.
What is STT?
The Securities Transaction Tax (STT) is levied on transactions involving the buying and selling of securities on recognized stock exchanges in India. These securities include equity, derivatives, and units of equity mutual funds. Additionally, the tax extends to unlisted shares initially offered to the public in an IPO and later listed on recognized stock exchanges. Government authorities determine the tax rates, and both buyers and sellers are responsible for paying it.
Entities tasked with collecting STT include recognized stock exchanges, prescribed persons in mutual funds, and lead merchant bankers involved in IPOs. They are obligated to remit the collected STT to the central government by the 7th of the subsequent month. Failure to collect or remit the tax on time leads to penalties and interest.
It’s crucial to note that STT applies exclusively to transactions conducted on recognized stock exchanges. Off-market transactions are exempt from this tax. The securities subject to STT encompass a wide range, including equity shares, derivatives, mutual fund units, and even certain types of unlisted shares. Compliance with STT regulations is essential to ensure smooth and lawful trading activities in the Indian stock market.
Securities on which STT is levied
The Securities Transaction Tax (STT) is applicable to securities traded on recognized stock exchanges in India. Therefore, it does not apply to transactions conducted off-market. The following is a comprehensive list of securities subject to STT:
Equity Shares
Bonds
Debentures
Stocks
Units of Equity Mutual Funds
Exchange Traded Funds (ETFs)
Derivatives, including Futures & Options
Rights or Interest in Securities
Securitized Debt Instruments
Government securities of Equity nature
These securities represent various financial instruments commonly traded on stock exchanges, and STT is levied on transactions involving them to ensure fair taxation and regulation of the securities market in India.
Securities Transaction Tax Rates
Transaction
STT rate
Payer
Value on which STT to be paid
Purchase of equity share (delivery-based) or Unit of business trust
0.1%
Buyer
Purchase Value
Sale of equity share (delivery-based) or Unit of business trust
0.1%
Seller
Sales Value
Purchase of equity mutual fund (delivery-based)
NIL
Buyer
Not Applicable
Sale of equity mutual fund (delivery-based)
0.001%
Seller
Sales Value
Sale of equity shares (intraday) or Equity mutual fund (without actual delivery)
0.025%
Seller
Sales Value
Sale of Exchange Traded Funds (ETFs)
0.001%
Seller
Sales Value
Sale of Futures
0.0125%
Seller
Sales Value
Sale of Options (option not exercised)
0.0625%
Seller
Option Premium
Sale of Options (option is exercised)
0.125%
Purchaser
Settlement Price
Sale of unlisted equity shares or units of business trust under an IPO which are later listed on a recognized stock exchange
0.2%
Seller
Sales Value
Income Tax on Securities with STT paid
he income tax rates for securities on which Securities Transaction Tax (STT) is paid are generally lower compared to other assets. Below are the income tax rates applicable to such securities:
Equity Shares and Equity Mutual Funds:
Long-Term Capital Gains (LTCG) exceeding INR 1 lakh are taxed at 10%.
Short-Term Capital Gains (STCG) are taxed at 15% if the securities are held for less than 12 months.
Derivatives (Futures & Options):
Short-Term Capital Gains are taxed at the applicable slab rates if the securities are held for less than 12 months.
Long-Term Capital Gains exceeding INR 1 lakh are taxed at 10%.
Exchange Traded Funds (ETFs):
Taxed similar to equity shares, with LTCG exceeding INR 1 lakh taxed at 10%, and STCG taxed at 15% if held for less than 12 months.
Government Securities of Equity Nature and Rights or Interest in Securities:
Taxed based on the holding period and the gains realized, with LTCG exceeding INR 1 lakh taxed at 10% and STCG taxed at the applicable slab rates.
It’s essential to consult with a tax advisor or refer to the latest tax regulations to ensure compliance with applicable tax rates and rules.
The introduction of the grandfathering rule has brought about significant changes in calculating Long-Term Capital Gains (LTCG) on equity shares and Equity Mutual Funds. Under this rule, the cost of acquisition for determining LTCG is calculated by taking into account the highest price of the share or unit as on 31st January 2018 or the actual purchase price, whichever is higher.
Tax on Business Income
Regarding tax implications on business income from trading in securities, the Securities Transaction Tax (STT) paid on trading transactions can be considered a valid business expense. This tax, being a direct expense related to trading income, can be reported as an expense in the Profit and Loss Account while filing ITR-3.
For example:
Case 1: If a trader buys 100 shares of HDFC at INR 1000 each and sells them on the same day at INR 1006, it’s treated as an intraday transaction. With an applicable STT rate of 0.025% for intraday transactions, the STT will be calculated as INR 1006 * 100 * 0.025% = INR 25.15.
Case 2: If a trader sells 1 lot of NIFTY at INR 9000, the total value of the transaction would be INR 6,75,000 (INR 9000 * 75). Considering the STT rate applicable for futures transactions at 0.0125%, the STT would be INR 6,75,000 * 0.0125% = INR 84.375.
These examples illustrate how STT is calculated and treated as a business expense in trading scenarios, aiding traders in their tax filings.
