If you're filing income tax for the Assessment Year 2025–26 as a Limited Liability Partnership (LLP), partnership firm, or Association of Persons (AOP), it's crucial to understand the changes in the new ITR-5 form released by the Central Board of Direct Taxes (CBDT). Notified via Circular No. 42/2025, these updates are applicable from April 1, 2025, and introduce several structural and compliance-level adjustments aimed at tightening tax governance and easing filings for specific businesses.
Some taxpayers may benefit from these changes, while others could face new obligations. Let’s break down what’s new, what it means for you, and how to stay compliant.
One of the most significant changes in the new ITR-5 form is how capital gains are to be reported under Schedule CG. Taxpayers now have to split capital gains into two distinct periods:
Before July 23, 2024: Calculations will follow the provisions prior to changes introduced in the Finance Act.
On or after July 23, 2024: Gains will be calculated based on the amended tax laws.
This division enhances transparency, provides a clearer audit trail, and ensures correct application of the revised tax treatment, making the return more compliant and precise.
Starting October 1, 2024, if a taxpayer wishes to claim a loss on share buyback transactions, it's now mandatory to declare the related dividend income under ‘Income from Other Sources’.
This change is designed to curb false or inflated loss claims and ensure consistency in income reporting, particularly in high-value share buyback scenarios.
In a positive move, Section 44BBC has been added to the ITR-5 form, specifically benefiting cruise operators. This new section introduces a presumptive taxation scheme, allowing cruise businesses to declare income as a fixed percentage of gross receipts.
Benefits include:
Simplified compliance
No need for detailed profit and loss accounts
Faster and easier filing process
This can significantly reduce the administrative burden for operators in the booming cruise tourism sector.
From this assessment year, mentioning the correct TDS section code has been made mandatory. This includes:
Section 194A – For interest payments
Section 194C – For contractual payments
...and any other relevant TDS section under which tax was deducted.
This ensures that your TDS claims match accurately with data processed by the Centralized Processing Centre (CPC), minimizing refund delays and notices due to mismatched claims.
The new ITR-5 form has been entirely digitized and is designed to integrate directly with the Income Tax Department’s AI-powered validation system. While this reduces manual errors and improves efficiency, it also means:
Increased scrutiny of your financial disclosures
Tighter compliance checks
Real-time data matching with TDS, 26AS, and other government databases
The digital architecture is aimed at enhancing transparency and preventing tax evasion but demands careful and accurate reporting.
Be thorough with your capital gains classification – Incorrect date-based segregation could lead to notices.
Declare all relevant TDS section codes to avoid mismatches.
Cruise business owners should assess whether the presumptive scheme under Section 44BBC offers a better tax structure.
File with caution – The AI-backed system will automatically flag inconsistencies or errors.
The 2025 updates to the ITR-5 form represent a broader shift towards tech-driven tax governance. Whether you're a partner in an LLP, part of a joint venture, or involved in the cruise business, it's essential to stay ahead of these regulatory changes.
Working closely with your accountant or tax advisor and filing early can ensure compliance, avoid penalties, and potentially maximize your refund eligibility.
