What Is ITR 3 for NRIs
ITR 3 is the income tax return form used by NRIs who earn business or professional income in India.
For 2026, the compliance rules follow AY 2025 26.
ITR 3 applies if you are an NRI with:
- Business income from Indian operations
- Professional income from consulting, freelancing, or services provided in India
- Income from partnership firms
- Business losses to carry forward
- Capital gains along with business income
- Multiple income heads requiring complex reporting
NRIs cannot use ITR 1 or ITR 4.
ITR 2 is allowed only when there is no business or professional income.
NRIs must file ITR 3 if they have business or professional income in India. ITR 2 does not support business income schedules
What Is ITR 3 for NRIs
ITR 3 is the income tax return form used by NRIs who earn business or professional income in India.
For 2026, the compliance rules follow AY 2025 26.
ITR 3 applies if you are an NRI with:
- Business income from Indian operations
- Professional income from consulting, freelancing, or services provided in India
- Income from partnership firms
- Business losses to carry forward
- Capital gains along with business income
- Multiple income heads requiring complex reporting
NRIs cannot use ITR 1 or ITR 4.
ITR 2 is allowed only when there is no business or professional income.
Who Should Use ITR 3 in 2026
You own a business in India
You must file ITR 3 if you meet any of the following conditions:
Examples:
- Small business
- Shop or trading entity
- Online business registered in India
You earn professional income from India
Examples:
- Consulting
- IT services
- Coaching
- Design
- Legal or financial advisory
- Any service delivered to an Indian client
You are a partner in an Indian partnership firm
Your share of profits or remuneration must be reported in ITR 3.
You earn capital gains along with business income
Capital gains require Schedule CG.
Business income requires Schedule BP.
Therefore, ITR 3 is required.
Documents Needed for ITR 3 Filing
Prepare the following before starting your return:
PAN card | Passport travel history | Form 26AS | AIS | Bank statements | Books of accounts (if applicable) | Capital gains statements | Rental income documents | Profit and loss statement | Balance sheet (if required under law) | TDS certificates | Form 16A
Key Schedules in ITR 3 for NRIs
Schedule BP
Primary schedule for business and professional income.
Schedule CG
Short term and long term capital gains.
Schedule OS
Interest, dividends, and other income.
Schedule HP
House property income.
Schedule TR
Tax relief under DTAA.
Schedule FA
Foreign asset disclosure (only required under RNOR specific conditions).
Schedule TDS
Reports TDS deducted on all incomes.
Step by Step Process to File ITR 3 as an NRI in 2026
Filing follows the AY 2025 26 rules and forms.
Step 1: Determine Residential Status
Check if you fall under:
- NRI
- RNOR
- Resident
The day count method under Section 6 decides your classification.
Step 2: Confirm Eligibility for ITR 3
ITR 3 is mandatory if:
- You have any business income
- You have professional income connected to India
- You are a partner in a firm
- You want to carry forward business losses
Step 3: Reconcile AIS and Form 26AS
AIS includes:
- Receipts from Indian clients
- Professional payments
- Capital gains
- Bank transactions
Form 26AS includes:
- TDS entries
- Refunds
- Tax payments
Expert Callout: Missing or mismatched AIS entries are the biggest reason NRIs receive scrutiny notices.
Step 4: Prepare Business and Professional Income Details
You must compute:
- Gross receipts
- Expenses
- Depreciation
- Net profit
NRIs must report business income using the accrual method unless presumptive taxation applies.
Step 5: Apply DTAA Benefits (If Applicable)
If you paid tax abroad for the same income, claim DTAA benefits under Schedule TR.
Step 6: Fill All Relevant Schedules in ITR 3
Enter details in:
- Schedule BP
- Schedule CG
- Schedule OS
- Schedule TR
- Schedule TDS
- Schedule FA (only where legally required)
Step 7: Validate the Return and Compute Tax
The portal will calculate final tax or refund based on your inputs.
Step 8: E Verify Your Return
You can e verify using:
- Aadhaar OTP (if applicable)
- Net banking
- Demat account
- Bank EVC
Returns are not processed unless verified.
Common Mistakes NRIs Make With ITR 3
- Using ITR 2 instead of ITR 3
- Not reporting offshore accounts when RNOR
- Wrong depreciation entries
- Incorrect capital gains reporting
- Not applying DTAA relief
- Claiming deductions not allowed to NRIs
- Reporting gross income instead of net income
NRIs often misreport business losses and capital gains together. Incorrect reporting in Schedule BP or CG may cause a defective return under section 139(9).
Why NRIHelpLine Is the Best Partner for ITR 3 Filing
NRIHelpLine helps NRIs by providing:
- Correct form selection
- Residential status calculations
- Professional record keeping support
- Capital gains calculations
- Real time AIS reconciliation
- DTAA benefit optimization
- Complete filing of ITR 3
Your counseling fee is fully adjustable against the final service.
FAQs
Q. Who should use ITR 3
Q. Can NRIs file ITR 3 from abroad
Q. What if I file ITR 2 instead of ITR 3
Q. Do NRIs need to maintain books of accounts
Q. Can NRIs claim depreciation on business assets
Talk to our experts now
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Expert’s Note
Many NRIs fail to reconcile AIS with their own NRIs often misreport business losses and capital gains together. Incorrect reporting in Schedule BP or CG may cause a defective return under section 139(9).
Sanjeev Sharma (Advocate – NRI HelpLine Tax & Property Law Specialist)
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