The Income Tax Return (ITR)-5 Form for Assessment Year (AY) 2025-26 has undergone significant updates to align with the Finance Act, 2024 and CBDT Notification No. 42/2025 dated May 1, 2025.
If your business or entity is eligible to file ITR-5, it’s important to understand these changes, as they directly affect tax computation, reporting requirements, and filing procedures.
ITR-5 is applicable for specific entities such as:
Partnership firms (excluding sole proprietorships)
Limited Liability Partnerships (LLPs)
Associations of Persons (AOPs)
Bodies of Individuals (BOIs)
Artificial Juridical Persons (AJPs)
Business trusts or investment funds under Section 115UB
Co-operative societies and certain trusts exempt from ITR-7 filing
Not applicable for:
Individuals or Hindu Undivided Families (HUFs)
Companies (must file ITR-6)
Charitable/religious trusts claiming exemption under Section 11 (file ITR-7)
As per CBDT Notification No. 42/2025 – Income Tax, dated April 1, 2025, the following updates have been introduced:
What’s New: Schedule-CG now requires separate reporting for transactions before and on/after July 23, 2024.
Why: Capital gains tax rates and indexation rules differ after this date.
Example: LTCG under Section 112A is now taxed at 12.5% (earlier 10%) post-July 23, 2024.
Effective from: October 1, 2024
Change: Capital loss from share buybacks can be offset only if the related dividend income is reported under “Income from Other Sources” [Section 2(22)(f)].
Impact: Prevents incorrect capital loss claims, aligning with the new buyback taxation rules.
Change: New checkbox in Part A-Gen and Schedule BP for presumptive taxation — 20% of gross passenger revenue deemed taxable.
Benefit: Simplified compliance; no detailed books required.
Change: In Schedule-TDS, taxpayers must specify the exact TDS section code (e.g., 194A for interest, 194C for contracts).
Reason: Helps match data with Form 26AS/AIS, reducing mismatches.
Change: Entities must now provide:
LLP Identification Number
Date of incorporation
Two mobile numbers & two email IDs
Complete address
Impact: Improves accuracy in audits and departmental communications.
Change: New dropdown to select filing due date (July 31, October 31, November 30) and return type (e.g., Section 139(1) – on-time, 139(4) – belated).
Benefit: Ensures clarity on filing intent and compliance.
Change: New checkbox to declare if filer is a REIT or InvIT.
Purpose: Enables correct tax treatment for such trusts.
Change: Direct payment option for advance tax, self-assessment tax, and demand payments.
Benefit: Faster and more convenient compliance.
Entity Eligibility: Confirm your business/entity type matches ITR-5 applicability.
Aadhaar-PAN Linking: Mandatory for all partners/members/trustees. Aadhaar enrolment IDs no longer accepted.
Due Dates:
July 31, 2025 – No audit required
October 31, 2025 – Audit required under Section 44AB
November 30, 2025 – Entities with international/transfer pricing reports
Extension: For AY 2025-26, filing extended to September 15, 2025 (CBDT Circular, May 27, 2025).
Verification: Complete within 30 days via Aadhaar OTP, Net Banking, or Digital Signature.
Reconciliation: Always match income and TDS with Form 26AS and AIS.
Penalties: Incorrect claims may attract 200% penalty + 24% interest under Section 276C.
Step 1 – Download Utility
Go to incometax.gov.in → Downloads → ITR Forms AY 2025-26 → Download ITR-5 Excel Utility.
Step 2 – Fill in Details
Part A-Gen: Entity info, PAN, LLP ID, Section 44BBC declaration (if applicable).
Schedule-CG: Segregate capital gains pre/post July 23, 2024.
Schedule-TDS: Enter section codes and reconcile with AIS/26AS.
Schedule BP: Report presumptive income under 44BBC if eligible.
Fill other applicable income schedules.
Step 3 – Validate & Generate File
Click Validate → Fix errors → Generate XML/JSON.
Step 4 – Upload Return
Login → e-File → Income Tax Return → Upload → Select AY 2025-26, ITR-5, upload file.
Step 5 – E-Verify
Complete verification within 30 days.
Firms/LLPs: 30% + surcharge (12% if income > ₹1 crore) + 4% cess.
AOPs/BOIs: Slab rates if member shares are determinate; else 30% or maximum marginal rate (42.744% if income > ₹1 crore).
Capital Gains:
STCG (Sec 111A): 20% (post-July 23, 2024; earlier 15%).
LTCG (Sec 112A): 12.5% (post-July 23, 2024) with ₹1.25 lakh exemption.
LTCG (Sec 112): 12.5% without indexation (post-July 23, 2024).
Presumptive Income (44BBC): 20% of gross receipts.
Example 1 – Partnership Firm
Business income: ₹50 lakh → Tax @ 30% = ₹15 lakh
STCG: ₹5 lakh → Tax @ 20% = ₹1 lakh
Total tax = ₹16 lakh + 4% cess = ₹16,64,000
Example 2 – AOP with Buyback Loss
Dividend income: ₹10 lakh taxed @ 30% = ₹3 lakh + cess = ₹3,12,000
Capital loss: ₹8 lakh (carry forward for 8 years)
Example 3 – Cruise Business (44BBC)
Revenue: ₹1 crore → Presumptive income: ₹20 lakh → Tax = ₹6 lakh + cess = ₹6,24,000
Notification No. 42/2025 (May 1, 2025): Revised ITR-5 with updated schedules.
Circular 10/2025 (July 28, 2025): Extended processing timelines for complex returns.
Finance Act, 2024: New capital gains rates, buyback taxation, Section 44BBC introduction.
The new ITR-5 form demands more precise reporting, especially for capital gains, TDS section codes, and entity details. Correct categorisation and timely filing are crucial to avoid penalties.
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