February 13, 1996




Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA  22312


Re:     Boston Financial Qualified Housing Tax Credits L.P. III
        Report on Form 10-Q Edgar for Quarter Ended December 31, 1995
        File No. 01-18462


Dear Sir/Madam:

Pursuant to the  requirements of Rule 901(d) of Regulation S-T,  enclosed is one
copy of subject report.

Please  stamp and  return  the  enclosed  copy of this  letter  in the  enclosed
stamped, self-addressed envelope to acknowledge receipt of this filing.

Very truly yours,





Marie D. Ricciardi
Assistant Controller




<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

Quarterly  Report Under  Section 13 or 15(d) of the  Securities  Exchange Act of
1934 (Mark One)

[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 1995

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from                    to

For Quarter Ended      December 31, 1995  Commission file number       01-18462
                  
               Boston Financial Qualified Housing Tax Credits L.P. III
             (Exact name of registrant as specified in its charter)

 Delaware                                                    04-3032106
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

101 Arch Street, Boston, Massachusetts                       02110-1106
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code      (617)439-3911

        Indicate by check mark whether the  registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .


<PAGE>



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

                                TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION                                     Page No.
------------------------------                                    --------

Item 1.  Combined Financial Statements

         Combined Balance Sheets - December 31, 1995 (Unaudited)
           and March 31, 1995                                           1

         Combined Statements of Operations (Unaudited) - For the Three
           and Nine Months Ended December 31, 1995 and 1994             2

         Combined Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Nine Months Ended December 31, 1995    3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Nine Months Ended December 31, 1995 and 1994                 4

         Notes to Combined Financial Statements (Unaudited)             5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                          13

PART II - OTHER INFORMATION

Items 1-6                                                               17

SIGNATURE                                                               18



<PAGE>



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

                
   
         COMBINED BALANCE SHEETS - December 31, 1995 and March 31, 1995
<TABLE>
<CAPTION>

                                                                    December 31,              March 31,
                                                                        1995                    1995
                                                                     (Unaudited)
Assets
<S>                                                                <C>                      <C>

Current assets:
   Cash and cash equivalents                                       $     297,958            $    155,456
   Accounts receivable, net                                                   284,439                 160,409
   Interest receivable                                                     8,924                  18,704
   Notes receivable (Note 1)                                           1,462,693                       -
   Prepaid expenses                                                       59,438                  35,819
   Tenant security deposits                                               93,673                  66,473
   Other current assets                                                   93,511                  78,059
                                                                   -------------            ------------
     Total current assets                                              2,300,636                 514,920

Marketable securities, at fair value (Note 2)                            733,166               2,200,946
Investments in Local Limited Partnerships, net
   of provision for valuation of $1,635,000 in
   1995 and 1994 (Note 3)                                             33,001,059              36,694,357
Replacement reserves                                                     169,913                  67,995
Rental property at cost, net of accumulated
   depreciation                                                       12,140,082              12,508,437
Deferred acquisition fees escrow                                         450,000                 562,506
Deferred expenses, net of accumulated
   amortization of $29,215 and $21,352 in
   1995 and 1994, respectively                                            96,100                 103,963
                                                                   -------------            ------------
     Total Assets                                                  $48,890,956             $52,653,124
                                                                   =============           =========

Liabilities and Partners' Equity
Current Liabilities:
   Accounts payable to affiliates                                  $     622,294            $    356,743
   Accounts payable and accrued expenses                                 458,639                 343,277
   Current portion of mortgage notes payable                           6,797,419               6,816,613
   Interest payable                                                      598,517                 226,147
   Notes payable (Note 1)                                                624,761                       -
   Security deposits payable                                              87,362                  85,719
                                                                   -------------            ------------
     Total current liabilities                                         9,188,992               7,828,499

Payable to Developer                                                    317,874                 323,046
Deferred  acquisition fees payable                                      450,000                 562,506
General partner advances                                                611,909                 611,909
Mortgage  notes  payable                                              2,749,784               2,764,484
                                                                  -------------             ------------ 
 Total Liabilities                                                   13,318,559               12,090,444


Minority interest in Local Limited Partnerships                         593,257                  602,393

Commitments and contingencies (Notes 4 and 5)

Partners' Equity                                                      34,979,140              39,960,287
                                                                   -------------            ------------
   Total Liabilities and Partners' Equity                          $  48,890,956             $52,653,124
                                                                   =============             ===========
</TABLE>


The accompanying notes are an integral part of the combined financial 
statements.

<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)


                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)
         For the Three and Nine Months Ended December 31, 1995 and 1994

<TABLE>
<CAPTION>
                                              Three Months Ended                         Nine Months Ended
                                     December 31,          December 31,         December 31,          December 31,
                                         1995                  1994                 1995                  1994
                                    -------------         -------------         -------------        ---------
<S>                                <C>                    <C>                   <C>                  <C>

Revenue:
   Rental                          $      430,097         $     431,296         $   1,385,656        $    1,271,132
   Investment                              14,406                 8,254                73,851                23,624
   Other                                  124,980                76,634               164,020               125,568
                                   --------------         -------------         -------------        --------------
     Total Revenue                        569,483               516,184             1,623,527             1,420,324
                                   --------------         -------------         -------------        --------------

Expenses:
   Asset management fees,
     related party                        111,083               105,027               333,249               324,489
   General and administrative
     (includes reimbursements
     to an affiliate in the amounts
     of $119,178 and $88,834
     in 1995 and 1994,
     respectively)                        118,292               134,211               689,220               800,926
   Bad debt expense                         7,696                     -                 7,696                     -
   Property management fees,
     related party                          9,543                48,705                31,356               130,981
   Rental operations, exclusive
     of depreciation                      379,283               349,985             1,262,437             1,162,776
   Interest                               196,180               176,000               539,524               540,018
   Depreciation                           189,672                87,853               371,063               263,558
   Amortization                            45,328                50,688               136,261               152,095
                                   --------------         -------------         -------------        --------------
     Total Expenses                     1,057,077               952,469             3,370,806             3,374,843
                                   --------------         -------------         -------------        --------------

Loss before equity in losses of
   Local Limited Partnerships            (487,594)             (436,285)           (1,747,279)           (1,954,519)

Minority interest in losses of
   Local Limited Partnerships               4,932                 2,188                 9,136                 7,868

Equity in losses of Local
   Limited Partnerships                  (806,356)           (1,081,124)           (3,280,053)           (3,554,080)
                                   --------------         -------------         -------------        --------------

Net Loss                           $   (1,289,018)        $  (1,515,221)        $  (5,018,196)       $   (5,500,731)
                                   ==============         =============         =============        ==============

Net Loss allocated:
   To General Partners             $      (12,890)        $     (15,152)        $     (50,182)       $      (55,007)
   To Limited Partners                 (1,276,128)           (1,500,069)           (4,968,014)           (5,445,724)
                                   --------------         -------------         -------------        --------------
                                   $   (1,289,018)        $  (1,515,221)        $  (5,018,196)       $   (5,500,731)
                                   ==============         =============         =============        ==============

Net Loss per Limited
   Partnership Unit
   (100,000 Units)                       $( 12.76)             $ (15.00)             $ (49.68)             $ (54.46)
                                         ========              ========              ========              ========

</TABLE>
The accompanying notes are an integral part of the combined financial
 statements.
<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)


         COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                                   (Unaudited)
                   For the Nine Months Ended December 31, 1995

<TABLE>
<CAPTION>
                                                                                         Net
                                                        Initial        Investor      Unrealized
                                        General         Limited         Limited         Gains
                                       Partners        Partners        Partners       (Losses)            Total
<S>                                  <C>               <C>           <C>              <C>                 <C>

Balance at March 31, 1995            $  (475,891)     $   5,000      $  40,466,323    $  (35,145)    $   39,960,287

Net unrealized gains on
   marketable securities
   available for sale                          -              -                  -        37,049             37,049

Net Loss                                 (50,182)             -         (4,968,014)            -         (5,018,196)
                                     -----------      ---------      -------------    ----------     --------------

Balance at December 31, 1995         $  (526,073)     $   5,000      $  35,498,309    $    1,904     $   34,979,140
                                     ===========      =========      =============    ==========     ==============

</TABLE>

The accompanying notes are an integral part of the combined financial
 statements.

<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)


                        COMBINED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
              For the Nine Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>


                                                                                 1995                   1994
                                                                           --------------           ---------
<S>                                                                        <C>                      <C>

Net cash used for operating activities                                     $    (775,393)           $ (1,362,958)
                                                                           -------------            ------------

Cash flows from investing activities:
    Purchases of marketable securities                                        (1,580,820)             (1,376,765)
    Proceeds from sales and maturities
      of marketable securities                                                 3,093,575               2,929,542
    Cash distributions received from Local
      Limited Partnerships                                                       284,846                 363,422
    Decrease in deferred acquisition fee escrow                                  112,500                 112,500
    Payment of deferred acquisition fee                                         (112,500)               (112,500)
    Repayment of Local Limited Partnership's mortgage                           (850,000)                      -
    Additions to fixed assets                                                    (36,527)                (42,418)
    Proceeds from insurance claim                                                 33,819                       -
                                                                           -------------            ------------
Net cash provided by investing activities                                        944,893               1,873,781
                                                                           -------------            ------------

Cash flows from financing activities:
    Advances from (payments to) developer                                         (5,172)                244,000
    Repayment of mortgages payable                                               (33,894)                (24,059)
    Additions to mortgage notes payable                                                -                   6,195
    Repayment of note payable                                                    (10,211)                      -
    Advances from affiliate                                                       22,279                       -
                                                                           -------------            ------------
Net cash provided by (used for) financing activities                             (26,998)                226,136
                                                                           --------------           ------------

Net increase in cash and cash equivalents                                        142,502                 736,959

Cash and cash equivalents, beginning                                             155,456                 252,482
                                                                           -------------            ------------

Cash and cash equivalents, ending                                          $     297,958            $    989,441
                                                                           =============            ============
</TABLE>



The accompanying notes are an integral part of the combined financial
 statements.


<PAGE>



            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)

                     Notes to Combined Financial Statements
                                   (Unaudited)

The  unaudited  financial  statements  presented  herein  have been  prepared in
accordance  with the  instructions  to Form 10-Q and do not  include  all of the
information  and note  disclosures  required by  generally  accepted  accounting
principles.  These  statements  should be read in conjunction with the financial
statements and notes thereto included with the  Partnership's  10-K for the year
ended March 31, 1995. In the opinion of management,  these financial  statements
include  all  adjustments,  consisting  only of  normal  recurring  adjustments,
necessary to present fairly the Partnership's  financial position and results of
operations.  The results of operations  for the periods may not be indicative of
the results to be expected  for the year.  Certain  reclassifications  have been
made  to  prior  period  financial  statements  to  conform  to  current  period
classifications.


1.   Notes Receivable and Notes Payable

The Temple-Kyle  Limited  Partnership,  a Local Limited Partnership in which the
Partnership has invested, experienced financial difficulties which resulted in a
default on its mortgage.  In September 1995, as a result of the Joint Disclosure
Statement and Plan of  Reorganization  agreed upon by affiliates of the Managing
General Partner and the lender, the Partnership  purchased the mortgage from the
current  lender  for  $850,000  plus  a  non-recourse  note  for  $612,693.  The
non-recourse  note is collateralized by a letter of credit from the Partnership.
The  Partnership  assumed the terms of the original  mortgage  note and payments
commenced November 1, 1995.


2.   Marketable Securities

A summary of marketable securities is as follows:
<TABLE>
<CAPTION>

                                                                   Gross               Gross
                                                               Unrealized          Unrealized           Fair
                                               Cost                 Gains              Losses             Value
<S>                                       <C>                   <C>                 <C>              <C>

Debt securities issued by
   the US Treasury                        $   591,367           $   4,519            $  (2,517)      $   593,369

Mortgage backed securities                     56,957                 537                    -            57,494

Other debt securities                          82,938                   -                 (635)           82,303
                                          -----------           ---------            ---------       -----------

Marketable Securities
   at December 31, 1995                   $   731,262           $   5,056            $  (3,152)      $   733,166
                                          ===========           =========            =========       ===========

Debt securities issued by
   the US Treasury                         $1,540,330           $       -             $(13,264)       $1,527,066

Mortgage backed securities                    501,041               2,878              (22,027)          481,892

Other debt securities                         194,720                   -               (2,732)          191,988
                                          -----------           ---------            ---------       -----------
Marketable Securities
   at March 31, 1995                       $2,236,091           $   2,878             $(38,023)       $2,200,946
                                           ==========           =========             ========        ==========
</TABLE>



<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

2.   Marketable Securities (continued)

The contractual maturities at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
                                                                                                Fair
                                                                                 Cost           Value
<S>                                                                          <C>             <C>

Due in one to five years                                                     $   674,305     $   675,672
Mortgage backed securities                                                        56,957          57,494
                                                                             -----------     -----------
                                                                             $   731,262     $   733,166
                                                                             ===========     ===========
</TABLE>

Actual maturities may differ from contractual  maturities because some borrowers
have the right to call or prepay  obligations.  Proceeds from the sales of fixed
maturity  securities  were  approximately  $3,094,000  for the nine months ended
December 31, 1995.  Included in investment income are gross gains of $22,943 and
gross losses of $15,017 which were realized on these sales.

3.   Investment in Local Limited Partnerships

The  Partnership  uses the equity  method to  account  for its  limited  partner
interests in  fifty-four  Local  Limited  Partnerships  (excluding  the Combined
Entities) which own and operate  multi-family  housing complexes,  most of which
are government-assisted.  The Partnership,  as Investor Limited Partner pursuant
to the various  Local  Limited  Partnership  Agreements  which  contain  certain
operating and distribution  restrictions,  has generally acquired a 99% interest
in the profits,  losses,  tax credits and cash flows from  operations of each of
the Local Limited Partnerships.  Upon dissolution,  proceeds will be distributed
according to each respective partnership agreement.

The  following is a summary of  Investments  in Local  Limited  Partnerships  at
December 31, 1995, excluding the Combined Entities:
<TABLE>
<CAPTION>
<S>                                                                                            <C>

Capital contributions to Local Limited Partnerships and
   purchase price paid to withdrawing partners
   of Local Limited Partnerships                                                               $  70,650,910

Cumulative equity in losses of Local Limited Partnerships
   (excluding cumulative unrecognized
   losses of $15,009,990)                                                                        (40,745,511)

Cumulative cash distributions received from Local Limited Partnerships                            (1,259,690)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       28,645,709

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   7,154,323

   Accumulated amortization of acquisition
      fees and expenses                                                                              (1,163,973)
Investments in Local Limited Partnerships                                                         34,636,059

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------
                                                                                             $    33,001,059
</TABLE>
<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

Summarized  financial  information  from the  financial  statements of all Local
Limited Partnerships  accounted for on the equity method (excluding the Combined
Entities on the date of combination) in which the Partnership has invested is as
follows:

Summarized Balance Sheets - September 30, 1995 - Unaudited

<TABLE>
<CAPTION>
<S>                                                                                            <C>

Assets:
   Investment property, net                                                                    $ 195,200,473
   Other assets, net                                                                              13,449,721
   Current assets                                                                                  7,648,843
                                                                                               -------------
       Total Assets                                                                            $ 216,299,037
                                                                                               =============

Liabilities and Partners' Equity:
   Mortgages payable, net of current portion                                                   $ 177,044,283
   Other liabilities                                                                              10,953,177
   Current liabilities                                                                            16,618,908
                                                                                               -------------
       Total Liabilities                                                                         204,616,368

   Partners' Equity                                                                               11,682,669
                                                                                               -------------
       Total Liabilities and Partners' Equity                                                  $ 216,299,037
                                                                                               =============

Summarized Income Statements - For the Nine
Months Ended September 30, 1995 - Unaudited

Rental and other income                                                                        $  23,735,193
                                                                                               -------------

Expenses:
   Operating expenses                                                                             12,548,873
   Interest expense                                                                               11,616,129
   Depreciation and amortization                                                                   6,554,209
                                                                                               -------------
       Total expenses                                                                             30,719,211

Net Loss                                                                                       $  (6,984,018)
                                                                                               =============

Partnership's share of net loss                                                                $  (6,597,050)
                                                                                               =============
Other partners' share of net loss                                                              $    (386,968)
                                                                                               =============
</TABLE>

For the nine months ended December 31, 1995, the  Partnership has not recognized
$3,316,997,  of equity in losses relating to certain Local Limited  Partnerships
in which  cumulative  equity  in losses  and  distributions  exceeded  its total
investments in these Local Limited Partnerships.

4.   Other Matters

As previously  reported,  six local limited  partnerships  in which other Boston
Financial partnerships have invested filed lawsuits against HUD challenging rent
rollbacks  that HUD was  attempting  to institute  through the  relevant  Public
Housing  Agencies  ("PHAs").  All six of these  properties are subsidized  under
HUD's Section 8 Moderate  Rehabilitation  Program ("Mod  Rehab").  In all of the
cases,  the  courts  granted  summary  judgments  in favor of the local  limited
partnerships on the grounds that the proposed rollbacks were illegal.  In all of
those cases, HUD and the relevant PHAs appealed,  and the district court rulings
were upheld in two U.S. Courts of Appeals.

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

4.   Other Matters (continued)

In the case of one of these six properties,  HUD announced that it also intended
to partially terminate the Housing Assistance Payment contract ("HAP").

While  none of the  Partnership's  properties  were  parties  to the  six  cases
discussed  above,  approximately  21% of the gross  proceeds of the offering has
been invested in properties  which are subsidized under the Section 8 Mod Rehab.
The Partnership  bore a portion of the litigation and related  expenses  because
HUD and the  Managing  General  Partner  viewed the six cases as "test" cases in
that many of the issues are universal to all Mod Rehab properties. In fact, most
of the  Partnership's  Mod  Rehab  properties  have  entered  into a  settlement
agreement with HUD.


As  previously  reported,   there  have  been  investigations  and  prosecutions
involving certain developers and other persons related to the Mod Rehab Program.
It appears that such investigations and prosecutions are winding down, and it is
not currently  expected that these matters will have any material adverse impact
on the Partnership and its Properties.

5.   Commitments

As previously  reported,  a $100,000 promissory note was executed as part of the
settlement  agreement with the former management agent of Willow Lake. If in the
event of a default,  the  Partnership  has  guaranteed  payment of the  interest
obligation  and any costs of  collection  incurred by the lender with respect to
the guaranty.  The note calculates interest at a rate of 6% with a maturity date
of January 1, 2005.

6.   Subsequent Event

Since June 1993,  affiliates of the Managing  General Partner have been involved
in intensive workout  negotiations with the Federal  governmental  lender to the
Texas  Partnerships,  the Rural  Economic  and  Community  Development  Services
(RECDS) (formerly called the Farmers Home  Administration of the U.S. Department
of  Agriculture,  FmHA).  Affiliates of the Managing  General Partner reached an
agreement  with  RECDS for a  comprehensive  workout of the  twenty-eight  Texas
Partnerships.  The  workout  agreement  included  additional  loans  and  rental
assistance, a debt service moratorium,  through July 1995, and additional equity
from the Partnership.

Completion of the workout agreements proved to be a very difficult  undertaking.
As a result, the Managing General Partner has entered into agreements to sell or
transfer  substantially  all of the Indeco  properties.  The sales or  transfers
should be completed within the next thirty days.

<PAGE>

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

7.   Supplemental Combining Schedules

                                                  Balance Sheets
<TABLE>
<CAPTION>

                                     Boston Financial
                                     Qualified Housing
                                        Tax Credits         Combined           Eliminations            Combined
                         
                                       L.P. III (A)       Entities (B)              (A)                   (A)
<S>                                     <C>               <C>                   <C>                 <C>

Assets
Current assets:
   Cash and cash equivalents            $    174,725       $   123,233          $          -        $    297,958
   Accounts receivable, net                  652,945           110,939              (479,445)            284,439
   Interest receivable                         8,924                 -                     -               8,924
   Notes receivable                        1,462,693                 -                     -           1,462,693
   Prepaid expenses                           15,570            43,868                     -              59,438
   Tenant security deposits                        -            93,673                     -              93,673
   Other current assets                            -            93,511                     -              93,511
                                        ------------      ------------          ------------        ------------
     Total current assets                  2,341,857           465,224              (479,445)          2,300,636

Marketable securities, at fair value         733,166                 -                     -             733,166
Investments in Local Limited
   Partnerships, net of provision
   for valuation                          33,255,170                 -              (254,111)         33,001,059
Replacement reserves                               -           169,913                     -             169,913
Rental property at cost, net of
   accumulated depreciation                        -        12,140,082                     -          12,140,082
Deferred acquisition fees escrow             450,000                 -                     -             450,000
Deferred expenses, net                             -            96,100                     -              96,100
                                        ------------      ------------          ------------        ------------
     Total Assets                       $ 36,753,193      $ 12,871,319          $   (733,556)       $ 48,890,956
                                        ============      ============          ============        ============

Liabilities and Partners' Equity
Current liabilities:
   Accounts payable to affiliates       $    595,640      $    506,099          $   (479,445)       $    622,294
   Accounts payable and accrued
     expenses                                103,652           354,987                     -             458,639
   Current portion of mortgage
     notes payable                                 -         6,797,419                     -           6,797,419
   Interest payable                                -           598,517                     -             598,517
   Notes payable                             624,761                 -                     -             624,761
   Security deposits payable                       -            87,362                     -              87,362
                                        ------------      ------------          ------------        ------------
       Total current liabilities           1,324,053         8,344,384              (479,445)          9,188,992

Payable to developer                               -           317,874                     -             317,874
Deferred acquisition fees payable            450,000                 -                     -             450,000
General partner advances                           -           611,909                     -             611,909
Mortgage notes payable                             -         2,749,784                     -           2,749,784
                                        ------------      ------------          ------------        ------------
     Total Liabilities                     1,774,053        12,023,951              (479,445)         13,318,559

Minority interest in Local
   Limited Partnerships                            -                 -               593,257             593,257

Partners' Equity                          34,979,140           847,368              (847,368)         34,979,140
                                        ------------      ------------          ------------        ------------
     Total Liabilities and
       Partners' Equity                 $ 36,753,193      $ 12,871,319          $   (733,556)       $ 48,890,956
                                        ============      ============          ============        ============
</TABLE>

(A) As of December 31, 1995.
(B) As of September 30, 1995.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

7.   Supplemental Combining Schedules (continued)

                                             Statements of Operations
                                   For the Three Months Ended December 31, 1995
<TABLE>
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations       Combined
                                     L.P. III (A)        Entities (B)           (A)              (A)
<S>                                     <C>                <C>               <C>            <C>

Revenue:
   Rental                               $          -       $   430,097       $        -     $    430,097
   Investment                                 14,406                 -                -           14,406
   Other                                      41,955            83,025                -          124,980
                                        ------------       -----------       ----------     ------------
     Total Revenue                            56,362           513,122                -          569,484
                                        ------------       -----------       ----------     ------------

Expenses:
   Asset management fees,
     related party                           111,083                 -                -          111,083
   General and administrative                118,292                 -                -          118,292
   Bad debt expense                            7,696                 -                -            7,696
   Property management fees,
     related party                                 -             9,543                -            9,543
   Rental operations, exclusive
     of depreciation                               -           379,283                -          379,283
   Interest expense                            9,381           186,799                -          196,180
   Depreciation                                    -           189,672                -          189,672
   Amortization                               42,707             2,621                -           45,328
                                        ------------       -----------       ----------     ------------
     Total Expenses                          289,159           767,918                -        1,057,077
                                        ------------       -----------       ----------     ------------

Loss before equity in losses of
   Local Limited Partnerships               (232,798)         (254,796)               -         (487,594)

Minority interest in losses of Local
   Limited Partnerships                            -                 -            4,932            4,932

Equity in losses of Local Limited
   Partnerships                           (1,056,220)                -          249,864         (806,356)
                                        ------------       -----------       ----------     ------------

Net Loss                                $ (1,289,018)      $  (254,796)      $  254,796     $ (1,289,018)
                                        ============       ===========       ==========     ============

</TABLE>

(A) For the three months ended December 31, 1995.
(B) For the three months ended September 30, 1995.


<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

7.   Supplemental Combining Schedules (continued)

                                             Statements of Operations
                                    For the Nine Months Ended December 31, 1995
<TABLE>
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations       Combined
                                     L.P. III (A)        Entities (B)           (A)              (A)
<S>                                     <C>                <C>               <C>            <C>

Revenue:
   Rental                               $          -       $ 1,385,656       $        -     $  1,385,656
   Investment                                 73,851                 -                -           73,851
   Other                                      52,153           111,867                -          164,020
                                        ------------       -----------       ----------     ------------
     Total Revenue                           126,004         1,497,523                -        1,623,527
                                        ------------       -----------       ----------     ------------

Expenses:
   Asset management fees,
     related party                           333,249                 -                -          333,249
   General and administrative                689,220                 -                -          689,220
   Bad debt expense                            7,696                 -                -            7,696
   Property management fees,
     related party                                 -            31,356                -           31,356
   Rental operations, exclusive
     of depreciation                               -         1,262,437                -        1,262,437
   Interest                                    9,381           530,143                -          539,524
   Depreciation                                    -           371,063                -          371,063
   Amortization                              128,398             7,863                -          136,261
                                        ------------       -----------       ----------     ------------
     Total Expenses                        1,167,944         2,202,862                -        3,370,806
                                        ------------       -----------       ----------     ------------

Loss before equity in losses of
   Local Limited Partnerships             (1,041,940)         (705,339)               -       (1,747,279)

Minority interest in losses of Local
   Limited Partnerships                            -                 -            9,136            9,136

Equity in losses of Local Limited
   Partnerships                           (3,976,256)                -          696,203       (3,280,053)
                                        ------------       -----------       ----------     ------------

Net Loss                                $ (5,018,196)      $  (705,339)      $  705,339     $ (5,018,196)
                                        ============       ===========       ==========     ============

</TABLE>

(A) For the nine months ended  December 31, 1995. 
(B) For the nine months ended September 30, 1995.



<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

             Notes to the Combined Financial Statements (continued)

7.   Supplemental Combining Schedules (continued)

                                               Statements of Cash Flows
<TABLE>
<CAPTION>

                                         Boston Financial
                                        Qualified Housing
                                           Tax Credits           Combined         Eliminations         Combined
                                           L.P. III (A)               Entities (B)         (A)                 (A)
<S>                                     <C>                  <C>                 <C>                <C>

Net cash provided by (used for)
   operating activities                  $    (832,733)      $      57,340        $          -      $   (775,393)
                                         -------------       -------------        ------------      ------------

Cash flows from investing activities:
   Purchases of marketable securities       (1,580,820)                  -                   -        (1,580,820)
   Proceeds from sales and maturities
     of marketable securities                3,093,575                   -                   -         3,093,575
   Cash distributions received from
     Local Limited Partnerships                284,846                   -                   -           284,846
   Capital contributions paid
     to Local Limited Partnerships             (27,576)                  -              27,576                 -
   Capital contributions received                    -              27,576             (27,576)                -
   Decrease in deferred acquisition
     fee escrow                                112,500                   -                   -           112,500
   Payment of deferred acquisition fee        (112,500)                  -                   -          (112,500)
   Repayment of Local Limited
     Partnership's mortgage                   (850,000)                  -                   -          (850,000)
   Additions to fixed assets                         -             (36,527)                  -           (36,527)
   Proceeds from insurance claim                     -              33,819                   -            33,819
                                         -------------       -------------        ------------      ------------
Net cash provided by
   investing activities                        920,025              24,868                   -           944,893
                                         -------------       -------------        ------------      ------------

Cash flows from financing activities:
   Payments to developer                             -              (5,172)                  -            (5,172)
   Repayment of mortgages
     payable                                         -             (33,894)                  -           (33,894)
   Repayment of note payable                   (10,211)                  -                   -           (10,211)
   Advances from affiliate                      22,279                   -                   -            22,279
                                         -------------       -------------        ------------      ------------
Net cash used for financing activities          12,068             (39,066)                  -           (26,998)
                                         -------------       -------------        ------------      ------------

Net increase in cash
    and cash equivalents                        99,360              43,142                   -           142,502

Cash and cash equivalents,
    beginning                                   75,365              80,091                   -           155,456
                                         -------------       -------------        ------------      ------------

Cash and cash equivalents,
    ending                               $     174,725       $     123,233        $          -      $    297,958
                                         =============       =============        ============      ============
</TABLE>

(A) For the nine months ended  December 31, 1995. 
(B) For the nine months ended September 30, 1995.



<PAGE>



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

                                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The  Partnership  (including the Combined  Entities) had an increase in cash and
cash  equivalents  of  $142,502  from  $155,456 at March 31, 1995 to $297,958 at
December  31, 1995.  This  increase is  primarily  attributable  to net proceeds
received from sales and  maturities of marketable  securities  and cash received
from Local  Limited  Partnerships,  partially  offset by purchases of marketable
securities, cash used for operating activities,  principal payments on mortgages
and capital contributions to Local Limited Partnerships.

The Managing  General  Partner  initially  allocated 3% of the Gross Proceeds to
reserves.  The reserves were  established to be used for working  capital of the
Partnership  and  contingencies  related  to  the  ownership  of  Local  Limited
Partnership  interests.  The Managing  General  Partner may increase or decrease
such reserves from time to time, as it deems appropriate.  During the year ended
March 31, 1993,  the Managing  General  Partner  decided to increase the reserve
level to 3.75% and it transferred the additional  funds to the reserve  account.
Approximately  $194,000  has been  withdrawn  from the reserves to pay legal and
other costs  related to the Mod Rehab Issue  discussed in Note 4 to the Combined
Financial  Statements.  Additionally,  professional  fees  relating  to  various
property issues totaling approximately  $1,282,000 have been paid from reserves.
This amount includes  approximately  $1,044,000 for the Texas  Partnerships.  To
date,  reserve funds in the amount of $349,299 have been used to make additional
capital  contributions to two Local Limited Partnerships and the Partnership has
paid  $850,000  to purchase  the  mortgage of a Local  Limited  Partnership.  At
December 31, 1995, the reserve balance of approximately  $959,000 is invested in
various securities. Reserves may be used to fund Partnership operating deficits,
if the Managing General Partner deems funding  appropriate.  If reserves are not
adequate to cover the Partnership's operations,  the Partnership will seek other
financing  sources  including,  but  not  limited  to,  the  deferral  of  Asset
Management Fees paid to an affiliate of the Managing  General Partner or working
with Local Limited Partnerships to increase cash distributions.

Since the  Partnership  invests as a limited  partner,  the  Partnership  has no
contractual  duty to  provide  additional  funds to Local  Limited  Partnerships
beyond its specified investment. Thus, at December 31, 1995, the Partnership had
no contractual or other  obligation to any Local Limited  Partnership  which had
not been paid or provided for.

In the  event a Local  Limited  Partnership  encounters  operating  difficulties
requiring  additional funds, the Partnership might deem it in its best interests
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,044,000  noted above,  the  Partnership  has also advanced
$487,000 to the Texas Partnerships to fund operating deficits.

Cash Distributions

No cash  distributions were made during the nine months ended December 31, 1995.
As of December 31, 1995, all required  capital  contributions  have been made to
Local  Limited  Partnerships.  The interest  that is earned on the funds held in
reserves,  as  well  as any  cash  distributions  received  from  Local  Limited
Partnerships will first be used to fund operations of the Partnership.  Based on
the results of 1995 operations,  the Local Limited Partnerships are not expected
to  distribute  significant  amounts  of cash to the  Partnership  because  such
amounts will be needed to fund Property  operating  costs. In addition,  many of
the  Properties  benefit  from some type of federal or state  subsidy,  and as a
consequence, are subject to restrictions on cash distributions. Therefore, it is
expected  that only a limited  amount of cash will be  distributed  to investors
from this source in the future.



<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Results of Operations

For the three and nine months ended  December 31, 1995,  Partnership  operations
resulted in a net loss of $1,289,018 and $5,018,196,  respectively,  compared to
net losses of $1,515,221 and $5,500,731  for the  respective  1994 periods.  The
decrease  in net  loss for the  1995  periods  is  primarily  attributable  to a
decrease  in equity in losses of Local  Limited  Partnerships  and  general  and
administrative expenses.

The decrease in equity in losses of Local Limited  Partnerships is the result of
an  increase  in   unrecognized   losses   relating  to  certain  Local  Limited
Partnerships in which cumulative equity in losses and distributions exceeded the
Partnerships' total  investments in these Local Limited  Partnerships  during
the comparable periods.

The decline in general and administrative expenses for the three and nine months
ended  December  31,  1995  as  compared  to  the  comparable  1994  periods  is
attributable  to a  reclassification  of legal  expenses paid out of reserves on
behalf of the Combined Entity now deemed to be collectible.

Property Discussions

Limited  Partnership  interests  have been acquired in sixty-nine  Local Limited
Partnerships  which own and operate  rental  properties  located in  twenty-four
states.  Forty-two of the properties,  totaling 3,935 units, were  rehabilitated
and twenty-seven properties,  consisting of 1,614 units, were newly constructed.
All of the properties have completed  construction or rehabilitation and initial
rent-up.  Most  of the  sixty-nine  Local  Limited  Partnerships  in  which  the
Partnership  has  invested  have  stable  operations.   The  majority  of  these
properties are operating at break-even or above.

A few properties are experiencing  operating difficulties and cash flow deficits
due to a variety of reasons. The Local General Partners of those properties have
funded operating  deficits through project expense loans,  subordinated loans or
payments from operating  escrows.  In instances where the Local General Partners
have stopped funding  deficits  because their obligation to do so has expired or
otherwise,  the  Managing  General  Partner  is working  with the Local  General
Partner to increase  operating income,  reduce expenses or refinance the debt at
lower interest rates in order to improve cash flow.

Willow Lake, located in Kansas City, Missouri,  continues to improve operations.
The new Local General Partner completed  workout  negotiations with the mortgage
lender and execution of final workout documents  occurred in February 1994. Both
the former Local General Partner and management agent brought claims against the
new Local General Partner and the Local Limited  Partnership  relating primarily
to a return of  certain  advances  that they made to Willow  Lake prior to their
removal. A settlement agreement was entered into which called for a partial cash
payment to the former  management  agent, a cash flow note, an interest  bearing
note, and the repurchase of the former Local General  Partner's  Special Limited
Partner interest. The cash payment was made from the Partnership's reserves.

The  Temple-Kyle  Limited  Partnership  located  in Temple,  Texas,  experienced
financial  difficulties which resulted in a default on its mortgage.  The lender
placed the property  into  involuntary  bankruptcy  in May 1993, as a protective
measure.  In January  1994,  a bankruptcy  trustee was  appointed to oversee the
Local  Limited   Partnership's   affairs  during  the  bankruptcy   proceedings.
Affiliates of the Managing  General Partner reached an agreement with the lender
on a Joint Disclosure Statement and Plan of Reorganization.  The plan called for
the  Partnership  to purchase the mortgage from the current  lender for $850,000
plus a non-recourse note for approximately $612,000,  collateralized by a letter
of credit from the  Partnership.  Effective  September 30, 1995, an affiliate of
the  Managing  General  Partner  replaced  the  Local  General  Partner  and the
management  agent. The Bankruptcy Court approved the Joint Disclosure  Statement
on July 12, 1995, and confirmed the Plan of Reorganization on September 13,
1995.  The loan closing was held on September 29, 1995.

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Property Discussions (continued)

In June 1993, the Local General  Partner of Temple-Kyle  and certain  affiliates
(collectively,  "Indeco") of thirteen  Local Limited  Partnerships  in which the
Partnership  invested,  advised  the  Managing  General  Partner  of  increasing
personal  and  business  financial  difficulties  and  requested  assistance  in
resolving the problems related to these Local Limited Partnerships.  Indeco also
served as the Local General Partner in fifteen other Local Limited  Partnerships
in Texas (collectively, the "Texas Partnerships") and in one other Local Limited
Partnership in which other Boston  Financial  partnerships  have invested.  As a
result,  an affiliate of the Managing General Partner has become the controlling
Local  General  Partner and  management  agent of the Texas  Partnerships.  As a
result of Indeco's actions and financial  problems,  the mortgages for the Texas
Partnerships  went into  default.  Among other  things,  Indeco did not maintain
certain required reserves and escrows and the properties are in need of physical
repair and improvement.

Since June 1993,  affiliates of the Managing  General Partner have been involved
in intensive workout  negotiations with the federal  governmental  lender to the
Texas  Partnerships,  the Rural  Economic  and  Community  Development  Services
(RECDS) (formerly called the Farmers Home  Administration of the U.S. Department
of  Agriculture,  FmHA).  Affiliates of the Managing  General Partner reached an
agreement  with  RECDS for a  comprehensive  workout of the  twenty-eight  Texas
Partnerships.  The  workout  agreement  included  additional  loans  and  rental
assistance, a debt service moratorium,  through July 1995, and additional equity
from the Partnership.

In August 1995, RECDS informed Boston Financial that it would extend the workout
agreement for those properties which have had  rehabilitation  loans approved by
RECDS. Twelve properties, including seven of the Partnership's,  were then under
agreement.

Completion of the workout agreement proved to be a very difficult  undertaking,
even with respect to the "funded" properties. Consequently, the Managing General
Partner has begun the process of selling or  transferring  substantially  all of
the Indeco properties. At the current time the Managing General Partner believes
that it will not be able to preserve  the  Partnership's  position in any of the
Indeco properties. It is expected that the Partnership will shortly transfer its
interest in the  properties to RECDS or another  party.  Any  termination of the
Partnership's   position  in  the  Texas  Partnerships  will  have  certain  tax
consequences, including a recapture of tax credits. The Managing General Partner
will provide limited  partners with an estimate of such tax consequences as soon
as such information is available. The impact to investors will be minimal as the
properties represent such a small portion of the overall portfolio.

In May and August  1994,  the  primary  principal  of Indeco and  certain of its
affiliates  filed for bankruptcy.  The Managing General Partner has filed claims
against these parties as part of the bankruptcy actions.

It was  previously  reported  that  Harbour View  Associates,  located in Staten
Island,  New York, had defaulted on its HUD-insured loan and the lender assigned
the loan to HUD. A workout  proposal  was  submitted  in  December  1992 and was
initially  approved by HUD in March 1995.  The Local General  Partner is working
with HUD on the final terms.

HUD has a new program to sell all performing and  non-performing  mortgages in a
public  auction  process that is  scheduled to take place on a  region-by-region
basis over the next few years. The mortgage of Harbour View may be included in a
future auction.  If the property's  mortgage were assigned to a new lender,  the
property's continued feasibility will depend on the ability of the Local General
Partner or the  Partnership  or their  respective  affiliates  to  purchase  the
mortgages or to negotiate a satisfactory arrangement with the buyer.


<PAGE>

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

                                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Property Discussions (continued)

As  previously  reported,  Regency  Square and Rolling  Hills,  both  located in
Dayton,  Ohio, have  experienced low levels of occupancy and rental rates due to
the  deterioration of the local economy and the  neighborhoods in which they are
located.  The mortgages of both properties have been assigned to HUD and workout
plans were submitted to the agency but were rejected. In 1993, the Local General
Partner  engaged a new  management  company and  occupancy  has been  improving,
although it is still below  satisfactory  levels.  Operating  deficits have been
funded by accruing  interest  expense.  In February 1995, HUD notified the Local
General  Partner of its  intention to foreclose  upon Rolling  Hills and Regency
Square. An affiliate of the Managing General Partner became actively involved in
the discussions  with HUD to achieve work outs for these  properties.  Recently,
HUD  issued a  written  approval  on  three-year  workout  proposals  for  these
properties  which include the termination of any foreclosure  action in exchange
for  additional  capital to fund  capital  improvements.  Although  the  workout
arrangements  will be in place for three years,  HUD has the right to cancel the
agreements  during a sixty day period  following each annual  anniversary of the
agreements,  if HUD should sell the mortgage notes to a different party.  Such a
sale could occur as a result of the auctions  discussed in the paragraph  above.
The additional capital will be paid from property escrows.

The  Massachusetts  Housing Finance Agency ("MHFA")  executed a workout plan for
Pleasant Plaza located in Malden,  MA, in December,  1995. The workout  includes
increased  subsidy,  the  availability  of $1.3 million  from the Local  General
Partner's letter of credit to fund operating deficits, and the option to commit,
at the  maturity  of the  debt,  25% of the  units  towards  low  income  use in
perpetuity.  The  property  has  been  operating  at a  deficit  due to its debt
structure; however, the deficits are covered by operating deficit escrows of the
Local  General  Partner  and  by  the  workout  plan.  As  previously  reported,
affiliates  and a principal  of the sole owner of the Local  General  Partner of
Pleasant Plaza filed for reorganization  under Chapter 11 of the Bankruptcy Code
in 1992. A preliminary Plan of Reorganization is expected to be submitted to the
court by June, 1996.

The  original  General  Partner  of  Admiral  Court,  located  in  Philadelphia,
Pennsylvania,  was recently  replaced by a new Local  General  Partner,  Friends
Rehabilitation  Program,  Inc., a leading  non-profit  manager and  developer of
affordable housing in Philadelphia. The new Local General Partner refinanced the
property's mortgage which resulted in a lower debt service payment.

Shoreline and  Waterfront,  Buffalo,  New York  properties  which share a common
Local General Partner, have been experiencing occupancy problems due to the soft
rental  market.  The Local General  Partner is increasing  marketing  efforts to
improve  occupancy.  Both properties have received  approval for state grants to
improve  security  systems.  The  properties  carry cash flow mortgages from the
state.

Two  other   properties  in  which  the   Partnership  has  invested  have  been
experiencing negative cash flow due primarily to market conditions. The Managing
General  Partner is currently  working with local  management to ensure that the
properties are maintained and that operations stabilize as soon as possible.




<PAGE>



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)




PART II       OTHER INFORMATION

Items 1-5     Not applicable

Item 6        Exhibits and reports on Form 8-K

                (a)  Exhibits - None

                (b)  Reports on Form 8-K - No  reports  on Form 8-K were  filed
                     during the quarter ended December 31, 1995.
<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                                                     SIGNATURE

Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

DATED: February 13, 1996                 BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                         CREDITS L.P. III

                                         By: Arch Street III, Inc.,
                                         its Managing General Partner


                                         /s/Georgia Murray
                                         Georgia Murray
                                         A Managing Director, Treasurer
                                         and Chief Financial Officer




<PAGE>