ITR 5 gets a makeover with stricter capital gains, TDS rules for firms

The new ITR 5 form brings sharper rules on capital gains, TDS, and buy-back losses, raising the bar on compliance for firms, LLPs, AOPs, and more

A fresh ITR 5 form has been notified by the Central Board of Direct Taxes (CBDT), effective April 1, replacing the earlier version used for firms, LLPs, Association of persons (AOPs), Body of Individuals (BOIs), and similar entities.

 

“In exercise of the powers conferred by section 139 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:- 1. (1) These rules may be called the Income-tax (Fourteenth Amendment) Rules, 2025. (2) They shall come into force with effect from the 1st day of April, 2025. 2. In the Income-tax Rules, 1962, in Appendix-II, for FORM ITR-5, the CBDT informed through the notification. 

 

 

According to Latika Bajaj, associate partner at Singhania & Co, these amendments, driven by the Finance Act 2024, aim to improve data accuracy and compliance.

What is ITR 5 and who uses it?

According to the CBDT’s website, ITR 5 is the return form prescribed by the CBDT for non??'company entities, namely firms, LLPs, AOPs, BOIs, cooperative societies and other persons not required to file under sections 139(4A) 4D. Individuals, Hindu Undivided Families, companies and trusts must use other forms.

 

What are the new changes?  

Schedule CG now forces a clear divide of capital gains into two buckets: 

·  Before July 23, 2024

 

·  On or after July 23, 2024 

“This split will require taxpayers to pinpoint the exact sale date of each lot,” Bajaj told Business Standard. When shares are acquired in multiple tranches, applying FIFO correctly becomes critical to avoid misreporting. 

Reporting buy??'back losses

For the first time, ITR 5 lets taxpayers claim losses on share buy??'backs made after October 1, 2024, only if the linked dividend income is declared under “Income from Other Sources.”

Bajaj advises: 

·  Maintain both the offer??'acceptance date and payment??'credit date for each buy??'back lot.

 

·  Use broker??'provided FIFO??'based capital??'gains reports with exact transaction dates. 

New presumptive regime for cruise operators 

A dedicated line for Section 44BBC introduces a presumptive tax scheme for cruise??'ship businesses. Under this rule, operators can declare income at a fixed percentage of gross receipts, simplifying compliance for a niche sector. Bajaj notes that clear guidance on gross??'receipt definitions will help avoid disputes later. 

TDS transparency mandate 

To curb mismatches with Form 26AS, the revised Schedule??'TDS now requires the exact TDS section code (e.g., 194A, 194C) for every deduction.

“Cross??'verify your books with both the TRACES download and an internal TDS register,” Bajaj recommends, “and map each PAN to its corresponding deductor and income head.”