Iterative methods based on matrix splittings are useful in solving large sparse linear systems. In this direction, proper splittings and its several extensions are used to deal with singular and rectangular linear systems. In this article, we introduce a new iteration scheme called three-step alternating iterations using proper splittings and group inverses to find an approximate solution of singular linear systems, iteratively. A preconditioned alternating iterative scheme is also proposed to relax some sufficient conditions and to obtain faster convergence as well. We then show that our scheme converges faster than the existing one. The theoretical findings are then validated numerically.