The Central Board of Direct Taxes (CBDT) has released a new version of the ITR-5 form for Assessment Year 2025–26, applicable to partnership firms, LLPs, and Associations of Persons (AOPs). Notified through CBDT Notification No. 42/2025, the revised form took effect on April 1, 2025. It brings significant updates in how capital gains, TDS, and business incomes are reported. The focus is on improving transparency, streamlining digital filings, and supporting India’s expanding tax base with more refined scrutiny tools.

One of the most notable changes is the bifurcation of capital gains reporting in Schedule CG. Taxpayers now need to separate gains earned before and after July 23, 2024—the date when major amendments from the Finance Act were implemented. This split aims to simplify the assessment process by aligning tax treatment with legislative changes. It also enables tax officers to trace gains more effectively, reducing confusion and potential disputes during audits.

Another major change relates to how buyback losses are claimed. Starting October 1, 2024, a firm can only claim losses from share buybacks if the related dividend income has already been reported as “Income from Other Sources.” This rule has been introduced to prevent manipulation and ensure only genuine losses are accounted for. Firms that fail to declare the dividend income risk having their buyback loss claims rejected, making accurate reporting more essential than ever.

The new ITR-5 also brings good news for the cruise tourism industry through the introduction of Section 44BBC. This provision offers a presumptive taxation scheme, allowing cruise operators to declare a fixed percentage of their gross receipts as income. The move simplifies compliance requirements and is part of a broader push to support niche sectors in India’s growing economy. With tourism receiving increasing government focus, this change is expected to ease the tax burden on cruise businesses.

Finally, TDS reporting has been made stricter with mandatory disclosure of the exact section under which tax was deducted. Whether it’s Section 194A for interest or 194C for contracts, firms must now be precise. This helps the CPC system match claims accurately and process refunds more efficiently. Additionally, the new ITR-5 is optimized for online filing and is compatible with AI-based scrutiny tools, ensuring faster processing but also heightened oversight. Firms are advised to review all entries carefully before submission to avoid scrutiny or delays.

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Source – Business Today