The Central Board of Direct Taxes (CBDT) has notified the new ITR-5 form for Assessment Year 2025–26 via Notification No. 42/2025, effective from April 1, 2025—and it comes packed with changes that could impact your reporting, deductions, and refund timelines.
Key Changes in ITR-5 for AY 2025-26
Capital Gains Split Based on Date of Transfer
A significant update is the segregation of capital gains in Schedule-CG based on whether the transfer occurred before or after July 23, 2024 — the date on which key provisions of the Finance Act, 2024, took effect. This ensures clearer tax treatment in line with the revised capital gains framework.
1. Capital Gains Now Split by Key Date
One of the biggest updates lies in Schedule CG, where capital gains are now reported in two segments:
Before July 23, 2024: For transactions before key Finance Act changes took effect.
On or After July 23, 2024: For post-amendment gains or losses.
This bifurcation helps align gains with applicable tax treatments and gives tax officers clearer audit trails.
2. Buyback Losses Need Declared Dividends
From October 1, 2024, claiming losses on share buybacks is only allowed if the associated dividend income was reported as ‘Income from Other Sources.’ This cross-checking discourages misuse and ensures only valid losses are claimed.
3. Cruise Industry Gets a Presumptive Taxation Boost
Section 44BBC makes its debut—introducing a presumptive tax regime specifically for cruise businesses. Operators can declare income at a fixed rate on gross receipts, cutting down compliance headaches and aligning with India’s push to promote tourism.
Kind attention Taxpayers!
CBDT notifies ITR-Form 5 for AY 2025-26 vide Notification No. 42/2025 dated 01.05.2025.
Key updates:
🖋️ Schedule-Capital Gain split for gains before/ after 23.07.2024 (post changes in Finance Act, 2024)
🖋️Capital loss on share buyback allowed if… pic.twitter.com/fDhRKHKPO9— Income Tax India (@IncomeTaxIndia) May 3, 2025
4. TDS Section Codes Now Mandatory
You’ll now need to specify the exact section under which TDS was deducted (like 194A for interest, 194C for contracts). This move tightens CPC’s ability to match TDS claims, reducing mismatches and refund delays.
5. Built for Digital, Ready for AI
The new ITR-5 is optimized for seamless online filing. It’s built to feed directly into the tax department’s AI-assisted scrutiny engine—expect fewer errors, but also sharper oversight.
Who Can File ITR-5?
ITR-5 is applicable to entities such as:
- Firms
- Limited Liability Partnerships (LLPs)
- Association of Persons (AOPs)
- Body of Individuals (BOIs)
- Artificial Juridical Persons (AJPs)
- Estates of deceased and insolvent persons, and
- Business trusts and investment funds.
However, individuals, HUFs (Hindu Undivided Families), companies, and those required to file ITR-7 (such as charitable or religious trusts) are not eligible to use this form.
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