ITR-5 Form for AY 2025-26: Key Changes, Rules and Filing Guide

The updates concerning the ITR-5 form for Assessment Year (AY) 2025-26. The Central Board of Direct Taxes (CBDT) has made important changes to fall in line with the Finance Act, 2024, and Notification No. 42/2025, dated May 1, 2025, that taxpayers need to know to ensure proper filing.

Applicability of ITR-5 Form

ITR-5 form is prepared by specific entities, namely:

• Firms (other than individual proprietorship firms)
• Limited Liability Partnerships (LLPs)
• Associations of Persons (AOPs)
• Bodies of Individuals (BOIs)
• Artificial Juridical Persons (AJPs)
• Business trusts or investment funds under Section 115UB
• Cooperative societies and trusts exempted from ITR-7 filing

Note: ITR-5 is not used for individuals, Hindu Undivided Families (HUFs), companies, or trusts claiming exemptions under Section 11 (charitable trusts). Companies must file ITR-6, whereas individuals and HUFs file ITR-1 to ITR-4 based on their income profile.

Major Changes in ITR-5 for AY 2025-26

The CBDT’s Notification No. 42/2025-Income Tax, dated April 1, 2025, brought many changes to ITR-5 to improve transparency and compliance. These are the main changes:

1. Reporting of Capital Gains Separated by Date

• Change: Now Schedule-CG demands reporting of capital gains separately for transactions prior to and on or after July 23, 2024, in line with amendments made to the Finance Act, 2024.
• Why It Matters: Various tax rates and rules of indexation differ according to the date of transfer. For instance, Section 112A long-term capital gains (LTCG) are taxed at 12.5% after July 23, 2024 (earlier 10%), and the rules of indexation for certain assets have been amended.
• Impact: Aims at correct computation of tax in relation to the prevailing regime.

2. Capital Loss on Share Buybacks

• Change: Starting October 1, 2024, capital loss from share buybacks can only be offset when the corresponding dividend income is declared under “Income from Other Sources” (Section 2(22)(f)).
• Why It Is Important: This aligns with the Finance Act, 2024, which treats buyback proceeds as deemed dividends, taxing the shareholder directly, with sale consideration reported as “nil” to generate a capital loss.
• Impact: Prevents incorrect loss claims and promotes consistent reporting.

3. Section 44BBC introduction

• Change: A checkbox under Part A-Gen and Schedule BP introduces Section 44BBC, a presumptive taxation scheme for non-resident cruise ship operators, where 20% of gross passenger revenue is considered taxable.
• Why It Matters: Eases compliance for cruise companies by reducing unnecessary bookkeeping, but taxpayers must explicitly claim their eligibility.
•  Impact: Reduces audit requirements for qualifying entities.

4. Mandatory TDS Section Code Reporting

a. – Change: Schedule TDS now requires taxpayers to specify the exact TDS section code (e.g., 194A for interest, 194C for contracts).

b. – Why It Matters: Improves reconciliation with Form 26AS and the Annual Information Statement (AIS), reducing mismatches.

c. – Impact: Increases transparency and supports correct TDS credit claims.

5. Improved Entity Identification

a. – Change: Taxpayers must provide updated details such as name changes, LLP Identification Number, date of incorporation, and full contact information (including two mobile numbers, two email addresses, and complete address).

1. b. – Why It Matters: Reduces mismatches and improves communication for audits or notices.

6. Filing Status and Due Date Choice

• Change: There is a dropdown choice to pick deadlines for filing (July 31, October 31, or November 30) and the status of filing (e.g., Section 139(1) for timely filing, 139(4) for late returns).
• Why It Matters: Makes compliance time and filing intention clearer, avoiding mistakes.

7. Business Trust Declaration

• Change: A new check box selects whether the filer is a business trust (e.g., REITs, InvITs).
• Why It Matters: Ensures correct classification for taxpayers with special tax treatments.

8. e-Pay Tax Feature

• Change: The Income Tax portal now features an “e-Pay Tax” facility for hassle-free payment of advance tax, self-assessment tax, and demand payments.
• Why It Matters: Facilitates ease of tax payment and enhances compliance efficiency.

Reference: CBDT Notification No. 42/2025, dated May 1, 2025, and Finance Act, 2024.

Rules and Guidelines for Filing ITR-5

To file ITR-5 accurately, follow these guidelines:

• Eligibility Check: Ensure your entity type matches ITR-5 requirements.
• Aadhaar-PAN Linking: Mandatory for all partners, members, or trustees, as Aadhaar Enrollment IDs are no longer accepted (Finance Act, 2024, Section 139AA).
• Filing Deadlines:
  • July 31, 2025, for entities not requiring audit.
  • October 31, 2025, for entities requiring audit under Section 44AB.
  • November 30, 2025, for entities with international transactions requiring transfer pricing reports.
  • Extended to September 15, 2025, for AY 2025-26 due to form revisions (CBDT Circular, May 27, 2025).
• Verification: Verify within 30 days using Aadhaar OTP, net banking, or digital signatures.
• Reconciliation: Cross-check income and TDS details with Form 26AS and AIS to avoid discrepancies.
• Penalty for Errors: Incorrect claims or concealment may attract a 200% penalty and 24% interest under Section 276C.

How to File ITR-5 on the Income Tax Portal

Here is a step-by-step guide to filing ITR-5 using the Excel utility.

1. Download the ITR-5 Utility:

• Visit incometax.gov.in.
• Navigate to “Downloads” > “Income Tax Returns AY 2025-26” > “ITR-5 Excel Utility.”
• Extract the ZIP file to access the Excel sheet.

2. Fill in Details:

• Part A-Gen: Enter entity details, including PAN, name, address, and Section 44BBC declaration if applicable.
• Schedule-CG: Segregate capital gains before/after July 23, 2024. Report buyback losses with corresponding dividend income.
• Schedule-TDS: Input TDS section codes and reconcile with Form 26AS/AIS.
• Schedule BP: Report presumptive income under Section 44BBC if applicable.
• Other Schedules: Fill in income from business, house property, or other sources as relevant.

3. Validate and Generate XML/JSON:

• Use the “Validate” button in the Excel utility to check for errors.
• Generate the XML or JSON file after validation.

4. Upload to the Portal:

• Log in to the e-filing portal.
• Go to “e-File” > “Income Tax Return” > “Upload Return.”
• Select AY 2025-26, ITR-5, and upload the XML/JSON file.

5. E-Verify: Verify the return within 30 days via Aadhaar OTP, net banking, or digital signature to complete the filing process.

Income Tax Rates for AY 2025-26

• Partnership Firms/LLPs: Taxed at a flat 30% on total income, plus surcharge (12% if income exceeds ₹1 crore) and 4% Health and Education Cess.
• AOPs/BOIs: Taxed at slab rates if individual members’ shares are determinate; otherwise, at 30% or maximum marginal rate (42.744% for income above ₹1 crore).
• Capital Gains:
  • Short-term capital gains (STCG) under Section 111A: 20% (post-July 23, 2024; previously 15%).
  • LTCG under Section 112A: 12.5% (post-July 23, 2024; previously 10%) with exemption up to ₹1.25 lakh.
  • LTCG under Section 112: 12.5% without indexation (post-July 23, 2024).
• Presumptive Income (Section 44BBC): 20% of gross receipts for cruise ship operators.

Example 1: Partnership Firm with Business Income

Scenario: ABC LLP has a business income of ₹50 lakh and STCG of ₹5 lakh from shares sold on August 1, 2024.

• Business Income: ₹50 lakh × 30% = ₹15 lakh
• STCG (Section 111A): ₹5 lakh × 20% = ₹1 lakh
• Total Tax: ₹15 lakh + ₹1 lakh = ₹16 lakh
• Cess (4%): ₹16 lakh × 4% = ₹64,000
• Total Tax Liability: ₹16,64,000

Example 2: AOP with Buyback Loss

Scenario: XYZ AOP receives ₹10 lakh as buyback proceeds on October 15, 2024, with a cost of acquisition of ₹8 lakh. Dividend income is reported under “Income from Other Sources.”

• Dividend Income: ₹10 lakh (taxed at slab rates or 30% if shares are indeterminate).
• Capital Loss: Sale consideration (nil) – ₹8 lakh = ₹8 lakh loss (carry forward for 8 years).
• Tax Calculation: If taxed at 30%, dividend tax = ₹10 lakh × 30% = ₹3 lakh + 4% cess = ₹3,12,000.
• Note: The capital loss can offset future LTCG.

Example 3: Cruise Business under Section 44BBC

Scenario: A non-resident AOP earns ₹1 crore from cruise passenger carriage.

• Presumptive Income: ₹1 crore × 20% = ₹20 lakh
• Tax: ₹20 lakh × 30% = ₹6 lakh
• Cess (4%): ₹6 lakh × 4% = ₹24,000
• Total Tax Liability: ₹6,24,000

Case Study: Common Mistakes to Avoid

Case: DEF LLP filed ITR-5 for AY 2024-25 but failed to report buyback losses correctly, leading to disallowance. For AY 2025-26, they must:

• Report ₹5 lakh buyback proceeds as dividend income in Schedule OS.
• Show nil consideration in Schedule-CG to claim a ₹4 lakh capital loss.
• Reconcile TDS details with Form 26AS using correct section codes (e.g., 194A for interest).

Recent Circulars and Notifications

• Notification No. 42/2025 (May 1, 2025): Notified the revised ITR-5 form with updates to Schedule-CG, Schedule-TDS, and Section 44BBC.
• Circular 10/2025 (July 28, 2025): Relaxed time limits for processing electronically filed returns, aiding taxpayers with complex filings.
• Finance Act, 2024: Introduced changes to capital gains tax rates, buyback taxation, and Section 44BBC for cruise businesses.