Income Tax Return (ITR)-5 for the Assessment Year 2025-26 has undergone significant changes to align with the legislative changes introduced in the Union Budget 2024-25.
Capital Gain Schedule: The Union Budget amended Section 2(42A) changing the period of holding of a capital asset for it to be classified as short term capital asset. Earlier, there were different categories of assets for which the holding period of not more than 12/24/36 months was prescribed for the same to be classified as short term capital asset. W.e.f. 23rd July 2024, only 12 and 24 months have been prescribed. As a result, for units listed in a recognised stock exchange the period of holding has been reduced from 36 months to 12 months and for other assets not specifically covered, the period of holding has been reduced from 36 months to 24 months. The updated ITR - 5 contains an updated capital gains schedule to enable the taxpayers to split their gains before and after 23rd July 2024 and calculate the tax accordingly.
Capital Loss on share buyback: The Union Budget 2024 inserted a new proviso to Section 46A to provide that when a consideration for buyback is chargeable as dividend under Section 2(22)(f), the consideration for the purpose of this section shall be deemed NIL. Thus, capital losses on share buybacks will be allowed if corresponding deemed dividend is reported under “Income from other sources”. This change is applicable from 01.10.2024.
Profits and gains from the operation of cruise ships in the case of non-residents: A new presumptive tax scheme under Section 44BBC has been introduced w.e.f. AY 2025-26 for computing profit from the business of the operating cruise ships in case of non – residents. Under this scheme , a non resident cruise ship operator can declare his income from that business at the rate of 20% of the total amount received or receivable by , or paid or payable to him. To enable these reporting requirements, the following changes have been made in the ITR -5:
The relevant declaration field under Part A- GEN is amended to indicate whether the taxpayer is declaring income under Section 44BBC.
The Schedule BP has been updated to capture the amount of profit and gains deemed under Section 44BBC, similar to the existing reporting mechanism for other presumptive schemes like Sections 44B and 44BBA.
TDS Section Code reporting in Schedule: In the new ITR -5, taxpayers have to mention the specific section under which TDS is attracted. These details will be furnished in the Tax Payment Schedule.
(The author is a CA, lawyer, and secretary, Bombay Chartered Accountants' Society.)