ITR 5 Form Explained: Frequently Asked Questions (AY 2026-27)

ITR-5 is the income tax return form for partnership firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), cooperative societies, and investment funds under Section 115UB. With LLP registrations growing 37% year-on-year in May 2025, the number of entities required to file ITR-5 keeps rising rapidly. For AY 2026-27, CBDT notified a revised ITR-5 via Gazette Notification G.S.R. 229(E) dated 30 March 2026.

Key Takeaways

  • CBDT notified ITR-5 for AY 2026-27 via G.S.R. 229(E) dated 30 March 2026; a corrigendum (Notification No. 60/2026) fixed STCG formula errors on 10 April 2026.
  • LLP registrations grew 16.4% annually in FY 2024-25, making ITR-5 one of the fastest-growing return categories.
  • AMT applies to LLPs and partnership firms at 18.5% with no ₹20 lakh floor exemption.
  • Section 40(b) partner remuneration limits: 90% of book profit or ₹3 lakh (whichever is higher) on the first ₹6 lakh, and 60% on the balance.
  • Non-audit firms must file by 31 July 2026; audit cases by 31 October 2026.

What is ITR-5 and which entities must file it?

The entities that must file ITR-5 include:

  • Partnership firms registered under the Indian Partnership Act, 1932
  • Limited Liability Partnerships (LLPs) registered under the LLP Act, 2008
  • Association of Persons (AOPs) and Body of Individuals (BOIs)
  • Artificial juridical persons
  • Local authorities (municipal bodies, panchayats, etc.)
  • Cooperative societies
  • Investment funds under Section 115UB

The form is filed online. The designated partner or managing partner signs and verifies the return using a Digital Signature Certificate (DSC). For firms with turnover exceeding ₹1 crore, DSC-based e-verification is mandatory.

Is ITR-5 filing mandatory even if the firm has no income or incurred a loss?

Yes. Filing is mandatory for all partnership firms, LLPs, and other prescribed entities regardless of whether income is nil or a loss was incurred. A loss return filed on time preserves the right to carry forward business losses for set-off in future years. LLPs that skip nil returns often face difficulties during GST audits, loan applications, and MCA annual filings.

Important: Even an LLP with zero transactions during FY 2025-26 must file ITR-5. Filing a nil return takes minutes and avoids notices under Section 142(1).

What are the biggest changes to ITR-5 for AY 2026-27?

  • Unified capital gains reporting: No longer required to bifurcate gains around the 23 July 2024 date in separate columns (simplified vs. AY 2025-26)
  • New F&O disclosure column: Dedicated column for F&O income in the trading account schedule
  • Section 43B(h) MSME payments: Overdue payments to MSME suppliers must be separately disclosed
  • Updated Section 40(b) limits: Enhanced partner remuneration caps now apply

How does Alternate Minimum Tax (AMT) apply to LLPs?

AMT under Section 115JC applies to LLPs and partnership firms at 18.5% (plus surcharge and cess) on adjusted total income. Unlike individuals and HUFs who have a ₹20 lakh threshold exemption from AMT, LLPs and firms have no floor — AMT applies from the first rupee of adjusted total income. AMT credit can be carried forward for 15 years.

Section 40(b): Partner remuneration limits for AY 2026-27

Remuneration paid to working partners is deductible only up to the Section 40(b) limits:

  • On the first ₹6 lakh of book profit: 90% of book profit or ₹3 lakh (whichever is higher)
  • On the balance of book profit: 60%
  • If the firm has a loss: ₹1.5 lakh maximum

Remuneration above these limits is disallowed and added back to taxable income. The remuneration must be authorised by the partnership deed and paid only to working partners.

Common ITR-5 mistakes to avoid

  • Missing the nil return filing obligation — LLPs with no income must still file
  • Incorrect Section 40(b) computation — check the updated limits carefully
  • Forgetting AMT computation — many firms skip this and face demand notices
  • Wrong e-verification method — firms with turnover above ₹1 crore must use DSC; EVC is not allowed
  • Not disclosing MSME payment delays under Section 43B(h)

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Consult a qualified Chartered Accountant for advice specific to your situation. All figures and dates are based on information available as of May 2026.