In order to encourage better reporting accuracy and streamline the filing process, the Income Tax Department has introduced five new professional codes under ITR-3 for Assessment Year 2025-26. This is as part of the departmental endeavor to keep finetuning income classification and extend full-fledged reporting under income tax return filing. The new provision kicks in from professionals and businesses under some service heads, such as providing CA consultation and other professional services.
Here in this article, we will state what ITR-3 is, what the new codes are, who are affected by these, and how you can plan with expert guidance.
What is ITR-3?
ITR-3 is the form of income tax return for individuals and Hindu Undivided Families (HUFs) with income from a proprietorship business or profession. In contrast to ITR-1 or ITR-2, which are intended for salaried individuals or taxpayers with capital gains, ITR-3 requires elaborate disclosures regarding:
- Business income
- Professional receipts
- Profit and Loss Statement
- Balance sheet
- Tax audit applicability
Various Chartered Accountants, Attorney, Consultant, Physician, and freelancers come under this head, particularly those reporting in the regular books of account or presumptive taxation.
Introduction of 5 New Professional Codes in ITR-3
As a step towards further categorizing and including accuracy in reporting professional income, the Central Board of Direct Taxes (CBDT) has revised the professional codes for the Financial Year 2024–25 (Assessment Year 2025–26).
Following are the five new professional codes introduced:
- 09019 – Other Legal Services
- 09020 – Other Accounting Services
- 09021 – Tax Consultancy Services
- 09022 – Insolvency and Bankruptcy Services
- 09023 – Forensic Accounting and Investigation Services
These new codes have been made available in the revised ITR-3 utility on the income tax website. The taxpayers should choose the most suitable code that describes their nature of activity.
Why Were These New Codes Introduced?
Earlier, most professionals were coming under generic heads such as “Legal Services” or “Accounting Services,” which were not even indicative of the practice area. For instance, a CA having only tax consultancy practice was earlier compelled to choose “Accounting Services” or “Others,” which was vague.
The new codes are meant to:
- Ensure improved compliance and data analysis
- Avoid confusion during scrutiny or audit
- Enable the department to measure income patterns by profession more precisely
- Enable easier recognition of specialized niches like CA consultation, forensic service, and IBC practice
Implication for CA Consultation & Similar Services
If you are a Chartered Accountant involved in offering tax planning, GST compliance, or ITR filing services, CA consultation, then you will now report your income under Code 09021 – Tax Consultancy Services.
That is, you need to:
- Update your professional/business profile in the income tax portal
- Use the right code while filing ITR-3
- They should be based on services under your GST registration, invoices, and ICAI registration
- The right code allows proper profiling by the department and prevents mismatch at scrutiny or notices.
How to File ITR-3 With the Corrected Codes
Following is step by step guide for professionals:
- Log in to the Income Tax e-filing portal
- Select “File Income Tax Return” under AY 2025–26
- Select ITR Form 3
- Enter your new code (e.g., 09021) in Nature of Business/Profession
- Enter profit/loss details, balance sheet, and tax calculation
- Upload supporting documents (Form 26AS, audit reports if any)
- Submit and authenticate using Aadhaar OTP or EVC
Role of Professional Assistance
Selecting a correct professional code may not appear to be a serious matter, but it makes a large scale in your audit, tax profile, and classification. A small mistake of classification can invite attention or penalty of underreporting.
Therefore, selecting a trustworthy CA consultancy firm can assist you:
- To choose a correct professional code
- To prepare books of accounts or avail presumptive taxation correctl
- To get maximum deductions under Section 80 deductions, Section 44ADA, etc.
- For avoiding penalty on account of incorrect filing
Conclusion
Introduction of five new professional codes under ITR-3 is a step taken by the Income Tax Department to bring greater transparency, compilation of data, and accuracy in income classification. Professionals, particularly working in professions such as CA consultancy, law advisory services, and insolvency services, should be more careful in choosing the appropriate code while filing income tax return.
ITR Filing Alert: CBDT Announces Mandatory Scrutiny for FY 2025-26
If you need further assistance or have any doubts, our experts are here to help you. Call us: 8881-069-069.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.