Balance Sheet for ITR 3 and Reporting STCG from Debt Funds

Income Tax
1

Hi @TeamQuicko

I have some Intraday and F&O losses this year. My total capital was 100000, losses around 80000 and ledger balance with broker as on 31st March around 20000. I have some confusions regarding Balance Sheet entries in ITR 3. By far I have come across two ways of reporting it.

  1. I put 20000 (the capital I actually have as on 31st March) in “Proprietor’s Capital” in " Sources of Funds" and enter 20000 in “Other Current Assets” in “Application of Funds”. Thus both sides show an amount of 20000.

  2. I put 100000 (my initial capital) in “Proprietor’s Capital” in " Sources of Funds". Then in “Application of Funds”, I enter 20000 in “Other Current Assets” and put 80000 (losses from P/L account) in “(4-c) Profit and loss account/ Accumulated balance”. Thus both sides in this case show an amount of 100000.

Can you please inform which one is the right way of reporting it ?

Also, can you please tell me where to show short term capital gains from non equity based mutual funds (debt funds) in ITR 3 ? Should I show it in “Income from Other Sources” or In Schedule CG under “From Sale of Assets other than all the above-listed items” ?

2

The second option is the right way of reporting.

STCG from non-equity based mutual fund is required to be reported in " From Sale of Assets other than all the above listed items."

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3

Thank You Ma’am @anitabhadra

4

Hey @Kaustav_M,

As rightly mentioned by @anitabhadra

This will be correct.

Debt funds are considered capital assets and you’ll have to report them under ‘From Sale of assets other than all the above listed items.’

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5

Thank You Ma’am @Surbhi_Pal

6

Hi @TeamQuicko

Can you please tell me how to report balance sheet of ITR 3 in case of a profit ?

One of my friends made 7K profit with a capital of 50K. But he then withdrawn all 57K from trading account and transferred to his personal bank account. So, his ledger balance with broker as on 31st March is 0.

Now what should he enter in “Sources of Funds” and in “Application of Funds” in balance sheet ?

7

Hey @Kaustav_M,

In this case, the closing bank balance can be reported under source of funds while filling the balance sheet.

8

Thanks for your reply @Surbhi_Pal

The funny thing is that this Balance Sheet schedule is probably the most confusing part of ITR 3 for normal traders. But ultimately it does not affect the tax liability in any way.

I have talked to many of my friends regarding filing of ITR 3. Everybody seems to know where to show profit/loss from Intraday, F&O, LTCG, STCG, Dividend Income, Interest, Salary and even income from online games like Dream 11 etc. which are supposed to be the most important parts because this ultimately affects tax liability. But no-one is sure what to put in “Sources of Funds” and “Application of Funds” in balance sheet ! Everybody has a different opinion on that.

In this regard, I have one last question regarding this balance sheet problem. The section “(4-c) Profit and Loss Account / Accumulated Balance” which comes at the last of “Application of Funds” - is this section only to be filled when we have loss in P/L Account, or even profits from P/L Account also to be entered here ? If this section is only for showing loss then is there any section in “Sources of Funds” where we can show profit separately ? Thanks in advance @TeamQuicko

9

Hi @Kaustav_M,

I get it can be confusing, you can try Quicko to file ITR-3 where you won’t have to deal with all these schedules:)

I’ve also written an article here with detailed steps that might help you: FY23-24: Step-by-step guide on filing tax return for traders – Z-Connect by Zerodha

Let me know if you have any further doubts.

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10

Thanks @Surbhi_Pal

I have already filed my ITR for this year (let’s hope this gets processed !!). I had a confusion regarding balance sheet entries and income from debt funds which you and @anitabhadra have kindly addressed.

However I must admit that it was a big headache and consumed much of my time and energy in the last 2 weeks. It was the first time I filed ITR 3. So, from next year onwards I am definitely going to take professional help from @TeamQuicko.

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