Many important changes have been made in the ITR-5 form this time. This includes a new definition of capital gain, a new calculation of buyback loss and a new tax option for cruise operators. Let’s know the complete details
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 been made in the ITR-5 form. These changes are in accordance with the provisions made in the Central Government’s Budget 2024-25. The purpose of these changes is to make reporting more transparent and adapt tax rules to the new situations.
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 like stock market, buyback or international operations.’
Let us know what changes have been made in the form in ITR-5 and who has to fill it.
1. Change in definition of capital gains
Earlier, 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 (such as REITs, InvITs): If these are held for 12 months or less, then they will be considered short term. Earlier this limit was 36 months.
Other capital assets: Now these will be considered short term if they are held for 24 months or less. Earlier here too it was 36 months.
Apart from this, taxpayers will have to report their capital gains in two parts:
Dealings before 23 July 2024.
Dealings on or after 23 July 2024.
The purpose of this is to find out to which transactions the new holding period applies.
2. Rules for showing loss on share buyback have changed
Till now, if a company bought back its own shares and an investor incurred a loss on it, he could show it as a capital loss.
But now, if the buyback amount is considered as dividend under section 2(22)(f) of the Income Tax Act, then the base price of that transaction will be considered “NIL”. That is, you can show capital loss on it only if you have shown it as dividend in ‘Income from Other Sources’. This rule will be applicable to cases from October 1, 2024.
3. New tax rule for cruise ship business
This is a new presumptive taxation rule, especially for non-resident cruise operators. Now such operators can consider only 20% of their total earnings as taxable profit. For this, a new option has been added in ITR-5, where you have to tell that you are filing return under section 44BBC.
Also, it will have to be accounted for in Schedule BP (Business and Profession), as is done for the already existing sections 44B and 44BBA.
4. New instructions in reporting of TDS too
Earlier, taxpayers only had to tell how much TDS was deducted on them. Now in the new ITR-5, it has been made mandatory that along with every TDS entry, its respective section (Section Code) of the Income Tax Act should also be mentioned. This rule will be applicable in the Tax Payment Schedule.
With this, the tax department will be able to do cross-verification easily and the scope of tax evasion will be reduced.
Does ITR-5 apply to your organisation?
You will need to file ITR-5 if you fall into the following categories:
Firms and LLPs
AOPs (Association of Persons) and BOIs (Body of Individuals).
Trusts, cooperative societies, investment funds.
Artificial Juridical Person i.e. religious institutions, companies or corporations legally considered as ‘persons’.
This form is also required for inheritors of the property of a deceased or bankrupt.
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