Income Tax Department: ITR-3 & ITR-4 Filing Opens; Rental Income Calculation Changes

The Income Tax Department announced opening of ITR-3 filing for Assessment Year 2026-27 (Financial Year 2025-26) with enhanced online form and Excel utility accessibility. ITR-3 specifically targets individuals and Hindu Undivided Families (HUFs) deriving income from business or professional activities. Concurrently, significant changes were introduced in ITR-4 form affecting how taxpayers report rental income, particularly from self-occupied house properties and unrealised rent calculations. Key changes include: (1) Modified methodology for computing income from house property, (2) Treatment of unrealised rent (rent accrued but not received), (3) Enhanced disclosure requirements for rental arrangements, (4) Simplified calculation mechanisms reflecting international taxation standards. These changes reflect government's efforts toward: transparent income reporting, combating tax evasion through rental income under-reporting, alignment with GST regime's documentation standards, and formalization of informal economy. The changes particularly impact: small business owners, professional practitioners (doctors, lawyers, chartered accountants), real estate investors, and HUF income beneficiaries. For UPSC: (1) Tax policy and revenue administration reforms, (2) Government's digitization of tax filing and compliance, (3) Formalization of economy and documentation standards, (4) Property taxation and rental income reporting mechanisms, (5) Administrative simplification vs. compliance enhancement trade-offs; connects to broader fiscal policy and revenue generation themes.