ITR-5 explained: The time has come for the financial year 2024-25 (assessment year 2025-26). This time, like other forms, many important changes have been made in ITR-5 form. These changes are according to the provisions made in the Central Government’s Budget 2024-25. The purpose of these changes is to make the reporting more transparent and mold tax rules to the new conditions.
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 operation.
Let us know what changes have been made in the form in ITR-5 and which people 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 held for 12 months or less, they would be considered a short term. Earlier this limit was 36 months.
- Other Capital Assets: Now they will be considered a short term for holding 24 months or less. Earlier there were 36 months here.
Apart from this, taxpayers will have to report their capital gains in two parts:
- Dealing before 23 July 2024.
- On 23 July 2024 or subsequent dealing.
Its purpose is to find out which transactions the new holding period applies to.
2. Rules to show loss on share buybacks have changed
Till now, if a company has bought its own shares and suffered a loss to an investor, then he could show it like a capital loss.
But, now if the amount of buyback is considered dividend under Section 2 (22) (F) of the Income Tax Act, then the base price of that transaction will be considered as “Nil”. That is, you can show the capital loss on it only when you have shown it as a dividend in ‘Income from Other Sources’. This rule will apply to cases made from 1 October 2024.
3. New Tax Rules for Cruise Ship Business
This is the new presumptive taxation rule, especially for non-resident cruise operators. Now such operators can consider only 20% of their total earnings taxable profit. For this, a new option has been added to ITR-5, where you have to tell that you are filling returns under Section 44BBC.
Also, it will have to be accounted for in Schedule BP (Business and Profession), such as Sections 44B and 44BBA.
4. New instructions in TDS reporting also
Earlier, taxpayers had to tell how much TDS was cut on them. Now in the new ITR-5 it has been made necessary that along with every TDS entry, its related Income Tax Act should also be told. This rule will be applicable in Tax Payment Schedule.
This will enable the tax department cross-verification easily and will reduce the scope of tax evasion.
Does ITR-5 apply to your organization?
If you come to the category below, then you have to fill ITR-5:
- Firms and llps
- AOPS (Association of Persons) and Bois (Body of Individuals).
- Trust, Cooperative Society, Investment Funds.
- Artificial Juridical Person means religious institutions, company or corporation considered to be legally ‘individuals’.
- This form is also necessary for those who get the wealth of crazy or bankruptcy.
ALSO READ: EXPLAINED: ITR-1 to ITR-7 … Know which form should be filled
