Income-tax Form No. 5: Statement of Preliminary Expenses – Section 44(3)

Form 5 is an electronic statement prescribed under Section 44(3) of the Income-tax Act, 2025 read with Rule 27, for reporting preliminary expenses incurred in connection with setting up or expansion of a business. It is mandatory for all assessees claiming deduction under Section 44(2)(a), including individuals, firms, companies, trusts, and other eligible persons. The form must be filed for each Tax Year in which such deduction is claimed and is required to be submitted electronically to the prescribed authority using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). It must be filed one month prior to the due date of filing the return of income. The form captures detailed information including taxpayer particulars and item-wise reporting of eligible preliminary expenses such as feasibility reports, project reports, market surveys, and engineering services, along with disclosure of service providers, PAN, payments, and TDS details.

The primary purpose of Form 5 is to provide a structured disclosure of preliminary expenses to support deduction claims, ensure transparency, and enable verification and audit trails. Although no attachments are required, taxpayers must maintain supporting documents such as invoices, agreements, payment proofs, TDS records, and accounting data for assessment or verification. The form includes validation features, auto-filled fields, and standardized reporting to improve compliance accuracy and reduce errors. Filing of Form 5 is a prerequisite for claiming deductions, and failure to file or incorrect reporting may lead to disallowance of deductions, compliance notices, or penalties. The revised framework introduces concepts such as “Tax Year,” enhanced digital verification, and integration with audit processes. Overall, Form 5 strengthens compliance monitoring, facilitates system-based verification, and minimizes litigation risks through accurate and timely reporting of eligible expenses.

Income Tax Department
Ministry of Finance, Government of India

FAQ’s pertaining to Income Tax Form No. 5 – Statement regarding preliminary expenses incurred by the assessee to be furnished under Section 44(3)

Statement regarding Preliminary Expenses under Section 44(3) of the Income-tax Act, 2025

Q.1 What is Form 5?

Ans. Form 5 is an electronic statement required to be furnished under Section 44(3) of the Income-tax Act, 2025, for reporting preliminary expenses eligible for deduction incurred by an assessee in connection with setting up or extension of a business. The Form is prescribed under Rule 27 of the Income-tax Rules, 2025.

Q.2 Who is required to furnish Form 5?

Ans. Form 5 must be furnished by any assessee claiming deduction under Section 44 in respect of eligible preliminary expenses, as per section 44(2)(a), relating to:

• Preparation of feasibility report
• Preparation of project report
• Market or business survey
• Engineering services related to business

Applicable taxpayers include:

• Individuals
• Firms
• Companies
• Trusts
• Other eligible persons under the Act

Q.3 For which period is Form 5 required to be filed?

Ans. Form 5 must be furnished for each Tax Year in which deduction under Section 44(2)(a) is claimed.

Q.4 What is the due date for filing Form 5?

Ans. As per Rule 27, Form 5 must be furnished one month prior to the due date for filing the return of income under Section 263(1) of the Income-tax Act, 2025.

Q.5 To whom is Form 5 furnished?

Ans. Form 5 is furnished electronically to the Director General of Income-tax (Systems) or any person authorized by him.

Q.6 How is Form 5 filed?

Ans. Form 5 must be filed electronically through the Income-tax portal using:

• Digital Signature Certificate (DSC), or
• Electronic Verification Code (EVC)

Q.7 What key information is required in Form 5?

Ans. Part A — Particulars of the Assessee

Includes:

• Name
• PAN
• Address
• Status
• Email ID
• Contact number
• Tax Year

Part B — Details of Preliminary Expenses

Requires disclosure of:

• Nature of eligible activity
• Whether activity carried out by assessee or third party
• Name and PAN of service provider
• Amount paid or credited
• TDS applicability and tax deducted

Amounts must be reported in INR (₹).

Q.8 What types of preliminary expenses are covered?

Ans. Eligible expenses as per section 44(2)(a)-:

• Feasibility report preparation
• Project report preparation
• Market or business survey
• Engineering services related to business

Each activity must be reported separately if multiple service providers are involved.

Q.9 What if the assessee carried out the activity itself?

Ans. If the work is performed internally, the assessee must mention “SELF” in the relevant field.

Q.10 Is any information auto-filled in the Form?

Ans. Yes. Certain fields may be pre-filled automatically based on available Income-tax records.

Taxpayers must verify correctness before submission.

Q.11 What documents should be maintained for Form 5?

Ans. While attachments are not mandatory, the assessee should retain:

• Bills and invoices
• Contracts/agreements with consultants
• Proof of payment
• TDS challans (if applicable)
• Accounting records supporting claimed expenditure
  These may be required during assessment or verification.

Q.12 What is the verification requirement in Form 5?

Ans. The Form must include a declaration by the authorized signatory, confirming correctness and completeness of information.

Q.13 What happens if Form 5 is not filed or contains errors?

Ans. Failure to file or incorrect filing may result in:

• Disallowance of deduction under Section 44
• Issuance of defect or compliance notices
• Possible penalties under the Act

Q.14 What are key compliance tips for taxpayers?

Ans.

• Ensure expenses qualify under Section 44 of the 2025 Act
• Match reported expenses with accounting records
• Verify PAN and TDS details of service providers
• File Form 5 within prescribed time
• Retain supporting documents

Q.15 What are major changes in the revised Form framework?

Ans. Common updates aligned with the Income-tax Act, 2025 include:

• Use of “Tax Year” instead of Assessment/Previous Year
• Updated section and rule references
• Improved digital filing and validation features

Q.16 What is the objective of introducing the revised electronic Form?

Ans. The revised Form 5 aims to:

• Improve compliance accuracy
• Enable real-time validations
• Reduce errors through pre-filling
• Enhance taxpayer convenience

Q.17 Summary

Ans. Form 5 is a mandatory electronic compliance statement for taxpayers claiming deduction of preliminary expenses under Section 44(2)(a) of the Income-tax Act, 2025. Timely and accurate filing ensures continued eligibility for deduction and minimizes compliance risks.

Guidance Note pertaining to Income Tax Form No. 5 – Statement regarding preliminary expenses incurred by the assessee to be furnished under Section 44(3)

Form 5 is an Income-tax Form used by an assessee claiming deduction for preliminary expenses under Section 44(3) of the Income-tax Act, 2025, and is required to be furnished as a statement of particulars in accordance with Rule 27.

Purpose of Form 5

The primary purpose of filing Form 5 is to:

• Furnish a statement of preliminary expenses incurred in connection with setting up or extension of business
• Support claims of deduction under Section 44(2)(a) of the Income-tax Act, 2025
• Provide transaction-level disclosure of qualifying project and feasibility expenditure
• Enable audit trail, verification, and compliance monitoring
• Strengthen transparency, accountability, and revenue safeguards

Filing Requirements

(i) Who can file: Any assessee claiming deduction under Section 44 of the Income-tax Act, 2025, including:

• Individuals
• Firms
• Companies
• Trusts
• Other eligible persons
• Who must furnish the Form: Form 5 is furnished by the assessee or authorized signatory and does not require accountant certification, unlike Form FN 006 [3AE].
• When to file: Form 5 must be furnished one month prior to the due date for filing the return of income for the relevant Tax Year, as prescribed under Section 263(1).
• How to file: The Form must be filed electronically through the Income-tax e-Filing Portal and verified using:
• Digital Signature Certificate (DSC), or
• Electronic Verification Code (EVC)

Information Required in Form 5

Part A — Particulars of the Assessee

• Name
• PAN
• Address
• Status
• Email ID
• Contact Number
• Tax Year

Part B — Details of Preliminary Expenses

The Form requires reporting of qualifying preliminary expenses, including:

• Preparation of feasibility report
• Preparation of project report
• Conduct of market or business survey
• Engineering services relating to business
  For each category, the following details must be disclosed:
• Nature of activity
• Whether carried out by the assessee or an external party
• Name and PAN of the service provider
• Amount paid or credited
• TDS applicability and amount deducted (if applicable)
  If the assessee undertakes the activity itself, “SELF” must be reported.

Frequency and Due Date

Frequency: Form 5 must be filed for each Tax Year in which deduction under Section 44 is claimed.

Due Date: One month prior to the due date of filing the return of income under Section 263(1).

Documents Required

Although no attachment is required, the assessee should maintain:

• Bills and invoices
• Consultant or service provider agreements
• Proof of payments
• TDS challans and certificates (if applicable)
• Accounting records supporting expenditure
• Project feasibility and technical reports

These may be required for assessment, audit, or verification.

Process Flow of Filing

• Assessee compiles preliminary expenditure records
• Assessee verifies qualifying nature of expenses
• Statement is prepared in Form 5
• Form is uploaded on the Income-tax e-Filing Portal
• Assessee verifies the Form using DSC/EVC
• Electronic acknowledgement is generated

Integration Note: Form 5 serves as a pre-requisite statement for audit certification in Form 6.

Key Points to Note

• Filing of Form 5 is mandatory for claiming deduction under Section 44
• Incorrect or incomplete reporting may result in disallowance of deduction
• PAN and TDS details of service providers must be accurate
• Expenses must strictly fall within the scope of Section 44(2)(a)
• Multi-vendor activities must be reported separately
• Records must be retained for verification and audit

Outcome Details

Allowability of Deduction: Form 5 forms the statutory basis for determining eligibility of preliminary expense deductions.

System-Based Verification: Filed data is subject to backend validations, risk filters, and automated compliance checks.

Revenue Assurance: Structured reporting strengthens audit trails and reduces dispute risk.

Challenges and Compliance Enhancements

The revised Form 5 is structured as a smart e-Form designed to improve compliance through:

• Auto-population of taxpayer master details
• Real-time data validation and field controls
• Standardization of expenditure classification
• Improved integration with audit and deduction workflows

Common Changes Across Revised Forms

• Use of “Tax Year” instead of Assessment/Previous Year
• Updated statutory references under the Income-tax Act, 2025
• Strengthened digital verification mechanisms
• Improved data consistency across audit-linked Forms

Summary

Form 5 is a mandatory electronic compliance statement for taxpayers claiming deduction of preliminary business expenses under Section 44 of the Income-tax Act, 2025. Accurate and timely filing ensures deduction eligibility, strengthens audit credibility, and minimizes litigation and compliance risk.