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The Central Board of Direct Taxes (CBDT) has issued the new Income Tax Return (ITR) Form 5 for the Assessment Year 2025–26, incorporating several significant changes aimed at enhancing transparency and clarity in tax reporting.
Announcing the update on X (formerly Twitter) on Saturday, the Income Tax Department detailed the revisions, which include critical updates to capital gains reporting, share buyback disclosures, and tax deduction classifications.
Kind attention Taxpayers!
CBDT notifies ITR-Form 5 for AY 2025-26 vide Notification No. 42/2025 dated 01.05.2025.
Key updates:
🖋️ Schedule-Capital Gain split for gains before/ after 23.07.2024 (post changes in Finance Act, 2024)
🖋️Capital loss on share buyback allowed if… pic.twitter.com/fDhRKHKPO9— Income Tax India (@IncomeTaxIndia) May 3, 2025
New Bifurcation For Capital Gains
One of the most notable changes is the bifurcation introduced in Schedule-Capital Gain. Taxpayers must now report capital gains separately for transactions before and after 23 July 2024. This measure is expected to improve the granularity of capital gain disclosures and align reporting with time-sensitive provisions.
Additionally, the new form permits taxpayers to report capital losses on share buybacks, provided specific conditions are met.
Buyback Losses And Dividend Disclosure
According to the Income Tax Department, taxpayers may claim capital loss on share buybacks only if the related dividend income is disclosed under ‘Income from Other Sources’, and only for transactions post 1 October 2024.
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Furthermore, the department has introduced new technical references, including Section 44BBC, which relates to presumptive taxation for certain cruise-related businesses. This update extends the scope of ITR-5 to accommodate emerging sectors more effectively.
TDS Reporting Requirements Tightened
Another major change affects Schedule-TDS, where assessees must now mention the specific TDS section code.
This requirement seeks to ensure better classification and improved traceability of tax deducted at source, aligning with the broader goals of compliance and digitised tax governance.
Earlier Notification Of ITR-1 And ITR-4
Prior to this update, the CBDT had already notified ITR-1 (SAHAJ) and ITR-4 for the Financial Year 2024–25.
Taxpayers earning income between 1 April 2024 and 31 March 2025 must use the newly issued forms for filing returns in the upcoming assessment year.
For the first time, ITR-1 allows reporting of long-term capital gains (LTCG) under Section 112A, but only if the gains do not exceed ₹1.25 lakh, and there are no capital losses to carry forward or set off.
This change widens the usability of ITR-1 for small investors.
Declaration Requirements For Opting Out Of New Tax Regime
The notification also outlines updated rules for taxpayers choosing between the old and new tax regimes.
Those who opted out of new regime in AY 2024–25 must explicitly confirm their choice to continue or reverse.
Taxpayers opting out for the first time in AY 2025–26 are now required to furnish Form 10-IEA acknowledgement details.
In addition, the CBDT has clarified procedures for late filing of Form 10-IEA, offering further procedural guidance to ensure compliance.
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