The Income Tax Department has released a revised Income Tax Return (ITR) Form 5, notified by CBDT via Notification No. 42/2025 dated May 1, 2025, applicable from April 1, 2025, for the Assessment Year 2025-26.
This new form is used by:
- Firms (excluding individual proprietorships),
- LLPs (Limited Liability Partnerships),
- AOPs (Association of Persons),
- BOIs (Body of Individuals),
- Some Cooperative Societies and Trusts (that are not required to file ITR-7).
Check the Official Notification Here
Let's explore the major changes and why they matter.
1. Capital Gains Reporting - Now Split by Date
One of the most significant changes is in Schedule-Capital Gain. Now, you must:
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Separately report capital gains earned before and after July 23, 2024.
Why this matters: This split helps the tax department apply different tax rules based on the date of gain. Any change in law (like rate of tax, indexation, exemptions, etc.) will be better tracked this way.
2. Share Buyback Losses Allowed - With a Condition
The new form now allows reporting capital loss on share buybacks, but only if:
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The related dividend income from the buyback (especially after October 1, 2024) is reported under 'Income from Other Sources'.
Why this matters: This ensures consistency-if you claim a loss, you must have declared the income earlier.
3. New Reference to Section 44BBC
ITR-5 now includes a checkbox for Section 44BBC, which deals with presumptive taxation for certain businesses (newly introduced section in 2024 Budget).
Why this matters: Helps relevant taxpayers opt into simplified presumptive taxation, avoiding complex books of accounts.
4. New Requirement: TDS Section Code
Under Schedule-TDS, taxpayers must now mention the specific TDS section code (like 194A, 194C, etc.).
Why this matters: This allows the department to verify whether correct TDS provisions were applied and cross-check credits.
5. Updated Entity Identification Details
Taxpayers must now furnish complete and updated information such as:
- Name, including any recent changes,
- Date of formation and business commencement,
- LLP Identification Number (if applicable),
- PAN (Permanent Account Number).
Why this matters: Ensures correct linkage and avoids mismatches, especially in large partnerships or LLPs.
6. Detailed Address and Contact Information
More detailed address and contact fields are now mandatory:
- Flat No., Building Name, Locality, District, State, PIN Code, Country,
- Two mobile numbers and two email IDs.
Why this matters: Better communication and traceability for correspondence or scrutiny.
7. Filing Status and Due Date Selection
A new dropdown feature allows you to select the correct filing deadline:
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July 31, October 31, or November 30, based on the nature of the entity.
Also, you must specify the section under which the return is being filed, like:
- 139(1) - Filed on time,
- 139(4) - Belated return,
- 139(5) - Revised return,
- 92CD - Modified return under APA,
- 119(2)(b) - Filed under CBDT condonation.
Why this matters: Clarifies compliance and ensures the correct filing window is chosen.
8. Declaration for Business Trusts
A new checkbox asks whether the filer is a Business Trust.
Why this matters: Business Trusts have unique tax treatments (e.g., REITs, InvITs), so this improves classification and reduces disputes.
9. New 'e-Pay Tax' Feature
The Income Tax Department has launched an 'e-Pay Tax' feature on its portal, simplifying tax payments like:
- Advance Tax,
- Self-assessment Tax,
- Demand payment.
Why this matters: Saves time and enables seamless online compliance.
10. Big Picture - Upcoming Tax Law Overhaul
As a reminder, the Income-tax Act, 1961 is under review, and a new Income Tax Bill, 2025 is expected to be tabled in Parliament during the Monsoon Session. Stakeholders were invited to share suggestions earlier this year.
Why this matters: This ITR update could be a stepping stone towards a more concise, modern, and dispute-free tax regime.
Final Advice to Taxpayers
If your entity is required to file ITR-5, ensure:
- You're using the latest format,
- All details are filled correctly,
- You're aware of key dates and reporting changes,
- Losses, gains, and TDS entries are fully reconciled.
Early preparation and correct filing will help avoid penalties, notices, or refunds getting stuck.
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