ITR Form 5 for AY 2025–26: Key Updates You Must Know

On May 1, 2025, the Central Board of Direct Taxes (CBDT) issued Notification No. 42/2025, unveiling the updated Income Tax Return (ITR) Form 5 for the Assessment Year (AY) 2025–26. This form is primarily applicable to partnership firms, Limited Liability Partnerships (LLPs), and Association of Persons (AOPs). The revised form introduces several pivotal changes aimed at enhancing transparency, ensuring accurate reporting, and aligning with recent legislative amendments.

1. Capital Gains Bifurcation in Schedule CG

A notable modification in the new ITR Form 5 is the bifurcation of capital gains in Schedule CG. Taxpayers are now required to report capital gains separately for transactions:

  • Before July 23, 2024: Pertaining to gains realized prior to the enactment of the Finance Act, 2024.

  • On or After July 23, 2024: Pertaining to gains realized following the legislative changes.

This segregation facilitates the application of appropriate tax treatments based on the transaction date, ensuring compliance with the updated tax provisions.

2. Conditional Reporting of Share Buyback Losses

The updated form permits the reporting of capital losses arising from share buybacks, subject to specific conditions:

  • Applicability: For transactions executed on or after October 1, 2024.

  • Condition: The corresponding dividend income from the buyback must be declared under the head “Income from Other Sources.”

This measure ensures consistency in reporting and prevents the misuse of loss claims without corresponding income declarations.

3. Inclusion of Section 44BBC for Cruise Business

ITR Form 5 now incorporates a reference to the newly introduced Section 44BBC of the Income Tax Act. This section pertains to the presumptive taxation scheme for businesses engaged in operating cruise ships. Under this regime, eligible taxpayers can declare income at a prescribed rate on gross receipts, simplifying the compliance process for the cruise industry.

4. Mandatory Disclosure of TDS Section Codes

To enhance transparency and facilitate accurate cross-verification, the revised Schedule TDS mandates the disclosure of specific Tax Deducted at Source (TDS) section codes. Taxpayers must specify the exact section under which TDS has been deducted, such as:

  • Section 194A: Interest other than securities.

  • Section 194C: Payments to contractors.

This requirement aids in reducing mismatches and streamlines the reconciliation process with Form 26AS and the Annual Information Statement (AIS).

5. Enhanced Entity Identification and Contact Information

The updated form necessitates comprehensive disclosure of entity details, including:

  • Name: Including any recent changes.

  • Date of Formation and Business Commencement: To establish the operational timeline.

  • Permanent Account Number (PAN): For unique identification.

  • Limited Liability Partnership Identification Number (LLPIN): If applicable.

  • Detailed Address: Including flat number, building name, locality, district, state, PIN code, and country.

  • Contact Information: At least two mobile numbers and two email IDs for effective communication.

These enhancements aim to improve traceability and ensure accurate correspondence.

6. Specification of Filing Status and Due Date

A new dropdown feature allows taxpayers to select the appropriate filing deadline based on their entity type:

  • July 31: For entities not requiring audit.

  • October 31: For entities requiring audit.

  • November 30: For entities involved in transfer pricing.

Additionally, taxpayers must specify the section under which the return is being filed, such as:

  • Section 139(1): Filed on time.

  • Section 139(4): Belated return.

  • Section 139(5): Revised return.

  • Section 92CD: Modified return under Advance Pricing Agreement (APA).

  • Section 119(2)(b): Filed under CBDT condonation.

This structured approach ensures clarity in the filing process and aids in compliance monitoring.

Conclusion

The revisions in ITR Form 5 for AY 2025–26 reflect the CBDT’s commitment to enhancing transparency, ensuring accurate reporting, and aligning tax compliance with recent legislative changes. Taxpayers, especially partnership firms and LLPs, should familiarize themselves with these updates to ensure timely and accurate filing. For detailed information and to access the official notification, visit the e-Gazette portal.

FAQs

Q1: Who is required to file ITR Form 5?
ITR Form 5 is applicable to firms, LLPs, AOPs, BOIs, and artificial juridical persons, excluding individuals, HUFs, companies, and those filing ITR-7.

Q2: What is the significance of the capital gains bifurcation in Schedule CG?
The bifurcation allows for separate reporting of capital gains before and after July 23, 2024, aligning with changes introduced in the Finance Act, 2024, and ensuring appropriate tax treatment.

Q3: Under what condition can a capital loss on share buyback be claimed?
A capital loss on share buyback can be claimed if the corresponding dividend income from the buyback is reported under “Income from Other Sources,” applicable for transactions on or after October 1, 2024.

Q4: What is Section 44BBC, and who does it apply to?
Section 44BBC pertains to the presumptive taxation scheme for businesses operating cruise ships, allowing them to declare income at a prescribed rate on gross receipts, simplifying compliance.

Q5: Why is specifying the TDS section code in Schedule TDS important?
Specifying the exact TDS section code enhances transparency, facilitates accurate cross-verification with Form 26AS and AIS, and reduces mismatches in TDS claims.

Q6: Where can I access the official notification for the updated ITR Form 5?
The official notification can be accessed on the e-Gazette portal.