ITR-5 explained: The time has come to file tax returns for the financial year 2024-25 (Assessment Year 2025-26). This time, like other forms, many important changes have also been made in ITR-5 form. These changes are according to the provisions made in the Central Government’s Budget 2024-25. The aim of these changes is to make the reporting more transparent and mold tax rules according to new circumstances.
According to Chartered Accountant Kinjal Bhuta (Secretary, Bombay Chartered Accountants Society), ‘It will be necessary to understand and implement these changes seriously. Especially for those institutions whose income includes activities such as stock market, buyback or international operations.
Let us know what changes have been made in ITR-5 form and who will have to fill it.
1. Changes in the definition of capital gains
Previously, there were different periods of 12, 24 and 36 months to consider a capital asset as short-term or long-term. But now it has been simplified:
Listed units (eg Reits, Invits): If they are kept for 12 months or less, they will be considered short -term. Earlier this limit was 36 months.
Other capital assets: Now they will be considered short -term if they are kept for 24 months or less. Earlier here too this period was 36 months.
In addition, taxpayers will have to report their capital gains in two parts:
Deals before 23 July 2024.
On or after 23 July 2024, deals.
Its purpose is to find out to which transactions the new holding period applies.
2. Rules to show loss on share buyback have changed
So far, if a company buys back its own shares and an investor has a loss on it, it could show it as capital loss.
But now if the amount of buyback is considered a dividend under Section 2 (22) (F) of the Income Tax Act, then the basis of that deal will be considered as “zero”. That is, you can show the capital deficit on this only when you have shown it as dividend in ‘income from other sources’. This rule will be applicable from October 1, 2024.
3. New Tax Rules for Cruise Ship Business
This is a new estimated taxation rule, especially for non-resident cruise operators. Now such operators can consider only 20% of their total earnings. For this, a new option has been added to ITR-5, where you have to tell that you are filing returns under Section 44BBC.
In addition, it must also be included in the Schedule BP (Business and Business), as is done for Sections 44B and 44 BBAs already existing.
4. New instructions also in TDS reporting
Earlier, taxpayers had to tell how much TDS was cut on them. Now it has been made mandatory in the new ITR-5 that the section (section code) of the Income Tax Act should also be mentioned along with every TDS entry. This rule will be applicable in the tax payment schedule.
With this, the tax department will be able to cross easily and reduce the scope of tax evasion.
Does ITR-5 apply to your organization?
If you fall in the following categories then you have to file ITR-5:
Firm and LLP
AOP (union of individuals) and BOI (body of individuals).
Trust, cooperative societies, investment funds.
Artificial judicial individuals, ie religious institutions, companies or corporations which are legally considered ‘individuals’.
This form is also necessary for the heirs of the deceased or bankruptcy.
