Sharma, driving a modified Maruti Gypsy, was sitting pretty in the lead after a double run on the 35km special stage that took place along the Tungabhadra Dam, surrounded by picturesque hills.
The 41-year-old recorded an overall time of 1:57.19, ahead of Sanjay Aggarwal (Venu Ramesh Kumar), who held on to second position on 1:58.52, while last year's runner-up Suresh Rana (Parminder Thakur) moved up to third place on 1:59.23. The stage saw only a handful of drivers go flat out on the bumpy gravel track.
Leg 4 tomorrow will have special stages of 32km and 10km respectively. The five-day rally concludes in Goa on August 9.
Results after leg 3: 1. Sandeep Sharma & D. Varun (1:57.19s), 2. Sanjay Agarwal & Venu Kumar (1:58.52s), 3. Suresh Rana & Parminder Thakur (1:59.23s)
Extreme bike: 1. Nataraj (1:36.05s), 2. Mohit Verma (1:40.04s), 3. Promod Joshua (1:44.28s).