Income Tax Return Form ITR-5 is the prescribed return form for entities other than individuals and companies, who are not eligible to file ITR-1 to ITR-4 or ITR-6/ITR-7. The Income Tax Department mandates certain entities like LLPs, Firms, AOPs, BOIs, and others to furnish this form to report their income, deductions, audit reports, capital gains, and other relevant details.

This detailed guide covers: – Applicability and non-applicability – Key changes notified via CBDT Notification No. 42/2025 [dated 01.05.2025][1] – Detailed list of schedules – Audit and MSME payment disclosures – Capital gains computation and reporting – Filing process, due dates, and penalties – FAQs and summary checklist

Who Should File ITR-5?

Applicable to:

LLPs (Limited Liability Partnerships)
Firms (registered or unregistered)
AOPs (Association of Persons)
BOIs (Body of Individuals)
Artificial Juridical Persons
Business Trusts (REITs, InvITs)
Investment Funds (SEBI-registered AIFs – Cat I & II)
Estate of Deceased or Insolvent
Societies / Trusts not claiming Section 11/12 exemption

Not Applicable to:

Individuals / HUFs
Companies (should use ITR-6 or ITR-7)
Trusts/Institutions claiming Section 11/12 exemption
Political parties

Key Updates in ITR-5 for AY 2025–26 (CBDT Notification No. 42/2025)

As per Notification No. 42/2025, dated 01.05.2025, major changes were introduced in the structure and content of ITR-5, making it more detailed and compliance-heavy. Here are the key highlights:

Introduction of MSME Payment Reporting (New Schedule 43B(h))

Entities must now report disallowable payments to Micro and Small Enterprises if not paid within the time limit prescribed under Section 15 of the MSMED Act, 2006. The new Schedule 43B(h) requires:

Name and PAN of supplier
Date of invoice
Payment due date
Date of actual payment
Amount disallowed under Section 43B(h)

This ensures alignment with the Finance Act, 2023 amendments and promotes prompt MSME payments.

Enhanced Disclosures in Capital Gains Schedule

In Schedule CG: – Detailed classification of short-term and long-term gains from various sources like: – Shares – Bonds – Real Estate – Mutual Funds – Digital Assets (Crypto etc.) – Exempt gains and deduction claims under Sections 54, 54B, 54EC, 54F, etc.

Sub-schedules are now aligned with revised Rule 12 and focus on transparency.

Revised Schedule FA & AL

More granular reporting of foreign assets (bank accounts, equities, immovable property, etc.)
Schedule AL seeks detailed classification of Indian assets for entities with income exceeding ₹50 lakh.

Schedule SH-1 for Shareholding Pattern

All unlisted equity investments must now be disclosed
Includes acquisition date, face value, cost, and fair market value

Mandatory Electronic Verification through DSC

ITR-5 can only be filed after verification using a Digital Signature Certificate (DSC). Aadhaar OTP or EVC options are not permitted.

Full List of Schedules in ITR-5 (AY 2025–26)

Schedule	Purpose
HP	House Property Income
BP	Business / Professional Income
CG	Capital Gains (Short/Long Term)
OS	Income from Other Sources
CYLA / BFLA	Loss Adjustment from Current/Past Year
CFL	Carry Forward of Losses
VI-A / 80G	Deductions
DPM / DOA	Depreciation Schedules
FA	Foreign Assets
AL	Assets and Liabilities (if income > ₹50L)
IF	Partner/Member Info
SH-1	Unlisted Shareholding Disclosure
43B(h)	MSME Payment Delay Disclosures (New)
MAT / AMT Schedules	Alternate Tax Provisions for LLPs

Capital Gains in ITR-5 – Detailed Requirements

The CG schedule now distinguishes gains under:

Short-Term (Section 111A)

Listed securities with STT – taxed at 15%

Long-Term (Section 112/112A)

Equity shares with STT – taxed at 10%
Other assets (real estate, gold) – taxed at 20% with indexation

Virtual Digital Assets (Section 115BBH)

Crypto, NFTs taxed at 30%, no loss adjustment or exemption allowed

Exempt Gains (e.g., Section 54, 54EC, etc.)

Must be supported by investment proofs

Audit Requirements Under Section 44AB

Audit is mandatory if:

Nature	Threshold
Business Turnover	> ₹1 crore (or ₹10 crore if digital receipts ≥ 95%)
Professional Receipts	> ₹50 lakh

Upload: – Form 3CA/3CB + 3CD – Must include: UDIN, auditor details, standard followed (ICDS/AS/Ind AS)

MSME Reporting – New Mandatory Compliance

Due to Finance Act 2023 and as reflected in Notification 42/2025, firms must:

Track payment timelines under MSMED Act (15 or 45 days)
Disallow expense if delayed
Report vendor-wise details in Schedule 43B(h)

This is a crucial compliance area and failure may lead to expense disallowance + penalty.

Step-by-Step Guide to File ITR-5[2]

Log in to https://www.incometax.gov.in
Navigate to: e-File > Income Tax Return > File ITR
Choose:
1. AY 2025–26
1. ITR Form: ITR-5
1. Status: Partnership / LLP / AOP / BOI
Select filing method: Online / Upload JSON (Excel/Java utility)
Fill schedules:
1. BP, CG, OS, FA, AL, 43B(h), etc.
Upload audit report (if applicable)
Submit and verify using DSC only

Due Date for AY 2025–26

Case	Due Date
Without Audit	31st July 2025
With Audit	30th September 2025
Transfer Pricing (Form 3CEB)	31st October 2025

Late Filing Penalties – Section 234F

Income Level	Filed Late By	Penalty Amount
> ₹5 lakh	After Due Date	₹5,000
	After 31 Dec	₹10,000
≤ ₹5 lakh	Any Delay	₹1,000

Also liable for interest u/s 234A (filing), 234B/234C (advance tax shortfall).

FAQs – ITR-5 Filing Simplified

Q1. Is DSC compulsory?

Yes, ITR-5 must be verified using a Digital Signature Certificate (DSC).

Q2. Can LLPs use presumptive taxation?

No. LLPs are not eligible for Sections 44AD/44ADA. Regular computation is required.

Q3. Can Schedule 43B(h) be skipped if there are no MSME vendors?

Yes, but firms must self-certify that they don’t deal with MSMEs.

Q4. Is foreign asset disclosure mandatory?

Only if the firm has foreign income or assets, Schedule FA must be filled.

Q5. What if audit report is delayed?

ITR-5 will be invalid unless audit report is uploaded before filing.

Final Compliance Checklist

Select correct ITR-5 version (July 2024 updated)
Verify PAN, DSC, audit applicability
Track MSME vendor payments for 43B(h)
Fill capital gain & depreciation schedules accurately
Upload audit forms: 3CA/3CB + 3CD
Submit and verify return using DSC

MSME Payment Rules

Author’s Note: With expanded disclosures and audit mandates, ITR-5 for AY 2025–26 demands diligence and timely action. Start early, comply with MSME reporting, and avoid penalties by following updated ins

Reference:

[1] https://incometaxindia.gov.in/communications/notification/notification-42-2025.pdf

[2] https://www.incometax.gov.in/iec/foportal/help/aop/how-to-file-tax-returns

Written by Mahboob Gaddi and Farman Ahmad | Founders, Lawgical Search

ITR-5 – Filing for Business Entities in AY 2025–26 – MSME & Audit Compliance

Introduction