Changes Introduced in the

New ITR-3 and ITR-5

Forms Notified
for Assessment Year 2025-26
 The Central Board of Direct Taxes (“CBDT”) has notified
the Income Tax Return (ITR) Form 3 and Form 5 for the
Assessment Year (“AY”) 2025–26, applicable for income
earned during the Previous Year (“PY”) 2024-25 (01-04-2024
to 31-03-2025).
Unlike in the last couple of years, when these forms
were released well in advance, typically before March,
the ITR forms have been released with a delay of more than
a month. This created an anticipation that the department
may have to extend the due date to file the return of income.
This apprehension is based on the instructions given by the
High Courts1 to the CBDT to extend the due date for filing
income-tax returns so as to alleviate, to a certain extent,
hardships caused to assessees on account of the delay in
providing ITR filing utilities on time.
This article highlights the key changes in the revised ITR forms.

1 All Gujarat Federation of Tax Consultants vs. CBDT [2015] 61 taxmann.com 431 (Gujarat) and
Vishal Garg vs. UOI [2015] 61 taxmann.com 418 (Punjab & Haryana)

Changes Introduced in the

2 New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
1. Aadhaar Enrolment ID is Not Accepted
The Finance (No. 2) Act, 2024 amended Section 139AA of the Income-tax Act (“ITA”), with
effect from 01-10-2024, restricting the use of the Aadhaar Enrolment ID in place of the
Aadhaar number for PAN applications and Income-tax Returns.

In line with this amendment, Forms ITR-3 and ITR-5 have been updated to remove the
reference to the Aadhaar Enrolment ID. Taxpayers are now required to provide their Aadhaar
number/the Aadhaar number of partners, members, settlors, trustees, beneficiaries, and
executors, as the case may be, when filing their returns, aligning with the new provisions
under Section 139AA.

2. Change in Disclosure on Opting Out of the New

Tax Regime of Section 115BAC
The ITR-3 and ITR-5, applicable for AY 2024–25, simply asked whether the assessee had
exercised the option to opt out of the new tax regime under Section 115BAC(6) and required
the date and acknowledgement number of Form 10-IEA if applicable.

The new ITR-3 and ITR-5, applicable for AY 2025–26, introduce a more detailed disclosure
structure. They seek confirmation of past filings of Form 10-IEA and ask whether the
assessee wants to continue opting out of the New Tax Regime in the current year.

3. Reporting of Income Declared Under the

Presumptive Tax Scheme of Section 44BBC
To promote the cruise-shipping industry in India and make it an attractive global cruise
tourism destination, the Finance (No. 2) Act, 2024 inserted a new presumptive tax scheme
under Section 44BBC with effect from the AY 2025-26 providing special provision for
computing profits and gains of the business of the operation of cruise ships in the case
of non-residents. Under this scheme, 20% of the total amount received or receivable by,
or paid or payable to, a non-resident cruise ship operator for carriage of passengers is
deemed to be the profits and gains from that business.

To enable reporting of income under Section 44BBC, the following changes have been
made under the ITR forms:

(a) The relevant declaration field under Part A- GEN is amended to indicate
whether the taxpayer is declaring income under Section 44BBC.

(b) 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.

It is important to note that a tax audit under Section 44AB is generally not required when
income is declared under a presumptive taxation scheme. While Section 44AB specifically
excludes the assessee declaring income under Section 44B from tax audit, there is no such

Changes Introduced in the

New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
3
express exclusion for Section 44BBC, even though it is analogous to Section 44B. However,
the new ITR forms treat Section 44BBC in the same way as Section 44B. This suggests
that tax audit may also not be required for those declaring income under Section 44BBC.

4. Changes Due to the Amendments Made by the

Finance (No. 2) Act, 2024 for Taxation of Capital
Gains
As per Section 45(1), capital gains are taxable in the year in which a capital asset is transferred.
This means the date of transfer plays a critical role in determining the applicable tax
provisions.

With the enactment of the Finance (No. 2) Act, 2024, significant changes to the capital
gains tax regime have come into effect from 23rd July 2024. Therefore, when filing your
return for AY 2025-26 (i.e., for FY 2024-25), it’s important to check whether the asset was
transferred before or after this date, as this will impact the tax computation.

If the transfer date is before 23rd July 2024, the old tax provisions will continue to apply,
including the 15% tax rate on STCG covered under Section 111A, the 20% tax rate on LTCG
covered under Section 112 with indexation benefit, and the 10% tax rate on LTCG under
Section 112A.

However, if the transfer occurs on or after 23rd July 2024, new tax provisions will apply as
follows:

(a) The tax rate on short-term capital gains covered under Section 111A will be
20% instead of 15%.

(b) A uniform tax rate of 12.5% will apply to long-term capital gains under Section
112, and no indexation benefit will be available on such gains. However, a
grandfathering provision is introduced for land or buildings acquired before
23rd July 2024 and transferred on or after that date for resident individuals/
HUF.

(c) The tax rate on long-term capital gains covered under Section 112A will be
12.5% rather than 10%.

(d) The tax rates on capital gains for non-residents have also been amended,
which are consistent with changes to Sections 111A, 112, and 112A.

Consequential changes have been made to Forms ITR-3 and ITR-5 for the assessment
year 2025-26. The return requires disclosure of the date of transfer, separate reporting for
transfers made before and on or after 23rd July 2024, and the proper application of revised
tax rates and indexation rules.

Changes Introduced in the

4 New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
5. Reporting of Capital Gains from Unlisted Bonds
and Debentures As STCG or LTCG Based on the
Transfer Date
The Finance Act 2023 introduced a new Section 50AA, effective from AY 2024-25, to bring
Market Linked Debentures (MLDs) and Specified Mutual Funds (SMFs) under a special
capital gains regime. Any gain arising from the transfer, redemption or maturity of a unit
of such specified mutual funds or market-linked debentures is treated as short-term
capital gains and is taxable at the rate applicable to the assessee.

The Finance (No. 2) Act 2024 expanded the scope of Section 50AA. Effective from 23rd
July 2024, the provision also includes unlisted debentures and unlisted bonds. Therefore,
if unlisted debentures or bonds were issued on or before 22nd July 2024 but redeemed,
matured, or transferred on or after 23rd July 2024, the entire gain will be taxed as short-
term capital gains, regardless of the holding period.

Therefore, if the transfer occurs before 23rd July 2024, the resulting gain will be classified
as long-term and taxable according to the old provision. However, if the transfer takes
place on or after 23rd July 2024, that gain will be considered short-term and subject to
taxation under Section 50AA.

Consequential changes have been made to Form ITR-3 and ITR-5 for the assessment year
2025-26.

6. Reporting of Buy-back Proceeds As Deemed

Dividend Starting 1st October 2024
Until 30th September 2024, when a domestic company bought back its own shares, it
was required to pay additional tax under Section 115QA on the income distributed. In that
case, the amount received by the shareholder was exempt under Section 10(34A), and the
shareholder had no further tax liability.

The Finance (No. 2) Act 2024 reversed this approach. Effective from 01-10-2024, the entire
consideration received by shareholders on the buy-back of shares by a domestic company
will be taxed in the hands of the shareholders as a deemed dividend under Section 2(22)
(f). As a result, shareholders will have to pay tax on the full amount received from the buy-
back. For the calculation of capital gains, the consideration is considered to be nil. The net
outcome of the calculation will result in a capital loss.

Consequential changes have been made to Form ITR-3 and ITR-5 for the assessment year
2025-26. The taxpayers will report buy-back proceeds as dividend income in Schedule OS
and show nil consideration for capital gains, resulting in a notional capital loss in Schedule
CG.

Changes Introduced in the

New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
5
7. Withdrawal of Section 80-IC Deduction Schedule
Section 80-IC of the ITA allows a deduction to any assessee deriving profits and gains from
manufacturing or producing specified articles or things in a new unit or an existing unit
after substantial expansion. The deduction shall be allowed for 100% of the profits in the
first 5 years and 25%/30% of the profits in the next 5 years, provided the unit commenced
operations or substantial expansion between 07-01-2003 and 31-03-2012.

If an assessee commenced a manufacturing unit in the FY 2011–12, the deduction under

Section 80-IC would be available up to AY 2021–22. However, since the deduction period
has lapsed, the Schedule for claiming deduction under Section 80-IC has been removed
from Form ITR-3 and ITR-5.

8. Reporting of Disability Certificates for Deductions

Under Sections 80DD and 80U
The deduction under Section 80DD is available to a resident individual or Hindu Undivided
Family (HUF) who incurs medical expenditure or pays an insurance premium for the care
of a dependent family member with a disability or severe disability.

The deduction under Section 80U is available to a resident individual who is suffering
from a disability or severe disability.

In cases where the assessee or his dependent is suffering from autism, cerebral palsy, or
multiple disabilities, he is required to obtain a certificate issued by the medical authority in
Form 10-IA. For other types of disabilities, the assessee must obtain a disability certificate
in accordance with the guidelines issued by the expert committee.

In the previous ITR Form-3, taxpayers could enter the acknowledgement number of
Form 10-IA only, while there was no facility to report the acknowledgement number of
certificates for other disabilities. However, the new ITR Form-3 has introduced a separate
column to provide this information as well.

9. Reporting of Pass-Through Income As Per

Section 115U
Venture Capital Funds and Venture Capital Undertakings are allowed a pass-through
status under the ITA. If such funds are covered under the definition of investment fund,
being a Category-I or II AIF, as specified under Section 115UB, all incomes (except business
income) can be passed to the investors. The VC funds and undertakings that are not
covered under Section 115UB are allowed pass-through status under Section 115U.

Until now, there was no reference to Section 115U in Schedule PTI of the ITR forms. Thus,
investors of venture capital funds/undertakings covered under Section 115U were not
required to report pass-through income under Schedule PTI

Changes Introduced in the

6 New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
The new ITR-3 and ITR-5 addressed this issue by including a reference to Section 115U
in Schedule PTI, thereby enabling taxpayers to correctly report pass-through income
received from venture capital funds/ undertakings covered under Section 115U.

10. Scope of Audit Disclosure Requirement in

Schedule 5A Expanded
Schedule 5A of ITR-3 pertains to the apportionment of income between spouses governed
by the Portuguese Civil Code. In the previous assessment years, the ITR-3 form limited its
disclosure requirement to whether the spouse’s accounts were audited under Section
44AB or if the spouse was a partner in a firm subject to audit under that section.

However, Schedule 5A in the new ITR-3 has expanded this scope. It now seeks disclosure
of whether the spouse’s accounts are audited under any provision of the ITA (excluding
Section 92E) or under any other applicable laws.

11. Schedule AL is Applicable If the Total Income

Exceeds Rs. 1 Crore
Schedule AL, in the ITR-3 form, is used to report the taxpayer’s assets and liabilities. In the
form ITR-3, applicable till AY 2024-25, a taxpayer with a total income exceeding Rs. 50 lakh
was required to disclose his assets and liabilities at the end of the year. In the new ITR-3
form, this requirement now applies only to individuals whose total income exceeds Rs. 1
crore.

12. Schedule TDS Requires Disclosure of the TDS

Section
In the new ITR Form-3 and Form-5, taxpayers are required to mention the specific section
under which TDS has been deducted. This detail will be furnished in the Tax Payment
schedule.

Changes Introduced in the

New ITR-3 and ITR-5 Forms Notified
for Assessment Year 2025-26
7
About Us
Our Journey

Founded 1972

Evolution From a small family business to a leading

technology-oriented Publishing/Product
company

Expansion Launch of Taxmann Advisory for personalized

consulting solutions

Our Vision

Aim Growth Future

Achieve perfection, Evolution into a Continuously
skill, and accuracy company with providing practical
in all endeavour strong independent solutions through
divisions: Research Taxmann Advisory
& Editorial,
Production, Sales
& Marketing, and
Technology
Our Strength

Core
Editorial and
Research Division

Team
Over 200 motivated legal
professionals (Lawyers,
Chartered Accountants,
Company Secretaries)
Expertise
Monitoring and processing
developments in judicial,
administrative, and legislative
fields with unparalleled skill
and accuracy
Impact
Helping businesses navigate
complex tax and regulatory
requirements with ease

Taxmann Today

Legacy Innovation Commitment

Over 60 years of Technology-driven Ensuring perfection,

domain knowledge solutions for skill, and accuracy in
and trust modern challenges every solution provided
Our Core Domain Areas
Income Tax
Corporate Tax Advisory
Trusts & NGO Consultancy
Goods & Services Tax
TDS Advisory
Global Mobility Services Transaction Advisory
Personal Taxation Business Restructuring
Training Classification & Rate Advisory
Due Diligence Due Diligence
Training
Trade Facilitation Measures
Foreign Exchange
Management Laws
Due Dilligence UAE Corporate Tax
Advisory Services Corporate Tax Advisory
Assistance in compounding Corporate Structuring
of offences
VAT Advisory
Transactions Services
Residential Status
Investment outside India

Your Partners for

Frictionless Advice

Tax Advisory Tax Research Tax Restructuring

Support and Implementation
Support
High-quality advice for all your Get real-time research
Income-tax, GST, FEMA, and support Structure your business and
UAE Corporate Tax queries processes in a tax-efficient
By a team of trained
From a distinguished panel researchers way
of experts Implement the SOPs for tax
To upscale the quality of your
advice compliances
And save your manpower cost Automate your ERPs to handle
tax compliances
A Glimpse of the People
Behind Taxmann

Naveen Wadhwa Vinod K. Singhania V.S. Datey S.S. Gupta

Research and Advisory Expert on Panel | Research and Expert on Panel | Research and Expert on Panel | Research and
[Corporate and Personal Tax] Advisory (Direct Tax) Advisory [Indirect Tax] Advisory [Indirect Tax]

Chartered Accountant (All India Over 35 years of experience in Holds 30+ years of experience Chartered Accountant and Cost
24th Rank) tax laws Engaged in consulting and training & Works Accountant
14+ years of experience in PhD in Corporate Economics and professionals on Indirect Taxation 34+ Years of Experience in
Income tax and International Tax Legislation A regular speaker at various Indirect Taxation
Expertise across real estate, Author and resource person in industry forums, associations and Bestowed with numerous
technology, publication, 800+ seminars industry workshops prestigious scholarships and
education, hospitality, and Author of various books on Indirect prizes
manufacturing sectors Taxation used by professionals and Author of the book GST – How to
Contributor to renowned media Department officials Meet Your Obligations', which is
outlets on tax issues widely referred to by Trade and
Industry

Manoj Fogla Nirav Shah Sudha G. Bhushan

Expert on Panel | Research and Expert on Panel | Research and Expert on Panel | Research and
Advisory [Charitable Trusts and NGOs] Advisory [UAE Corporate Tax] Advisory [FEMA]

Over three decades of practising experience 25+ years of experience and practicing in 20+ Years of experience
on tax, legal and regulatory aspects of NPOs the UAE Advisor to many Banks and MNCs
and Charitable Institutions Chartered Accountant (All India 36th Rank) Experience in FDI and FEMA Advisory
Law practitioner, a fellow member of the Has previously worked with the KPMG
Institute of Chartered Accountants of India Authored more than seven best-selling
and also holds a Master's degree in books
Philosophy Provides training on FEMA to professionals
PhD from Utkal University, Doctoral Research Experience in many sectors, including
on Social Accountability Standards for NPOs banking, fertilisers, and chemical
Author of several best-selling books for Has previously worked with Deloitte
professionals, including the recent one
titled 'Trust and NGO's Ready Reckoner' by
Taxmann
Drafted publications for The Institute of
Chartered Accountants of India, New Delhi,
such as FAQs on GST for NPOs & FAQs on
FCRA for NPOs.
Has been a faculty and resource person at
various national and international forums
 Contact Us
Taxmann Delhi Taxmann Bengaluru
59/32, New Rohtak Road 12/1, Nirmal Nivas, Ground Floor,
New Delhi – 110005 | India 4th Cross, Gandhi Nagar
Phone | 011 45562222 Bengaluru – 560009 | Karnataka | India
Email | [email protected] Phone | +91 99869 50066
Email | [email protected]
Taxmann Mumbai
35, Bodke Building, Ground Floor, Taxmann Kolkata
M.G. Road, Mulund (West), Nigam Centre, 155-Lenin Sarani, Wellington,
Opp. Mulund Railway Station 2nd Floor, Room No. 213
Mumbai – 400080 | Maharashtra | India Kolkata – 700013 | West Bengal | India
Phone | +91 93222 47686 Phone | +91 98300 71313
Email | [email protected] Email | [email protected]

Taxmann Pune Taxmann Lucknow

Office No. 14, First Floor, Prestige Point, House No. LIG – 4/40,
283 Shukrwar Peth, Bajirao Road, Sector – H, Jankipuram
Opp. Chinchechi Talim, Lucknow – 226021 | Uttar Pradesh | India
Pune – 411002 | Maharashtra | India Phone | +91 97924 23987
Phone | +91 98224 11811 Email | [email protected]
Email | [email protected]
Taxmann Bhubaneswar
Taxmann Ahmedabad Plot No. 591, Nayapalli,
7, Abhinav Arcade, Ground Floor, Near Damayanti Apartments
Pritam Nagar Paldi Bhubaneswar – 751012 | Odisha | India
Ahmedabad – 380007 | Gujarat | India Phone | +91 99370 71353
Phone: +91 99099 84900 Email | [email protected]
Email: [email protected]
Taxmann Guwahati
Taxmann Hyderabad House No. 2, Samnaay Path,
4-1-369 Indralok Commercial Sawauchi Dakshin Gaon Road
Complex Shop No. 15/1 – Ground Floor, Guwahati – 781040 | Assam | India
Reddy Hostel Lane Abids Phone | +91 70866 24504
Hyderabad – 500001 | Telangana | India Email | [email protected]
Phone | +91 93910 41461
Email | [email protected]

Taxmann Chennai
No. 26, 2, Rajan St,
Rama Kamath Puram, T. Nagar
Chennai – 600017 | Tamil Nadu | India
Phone | +91 89390 09948
Email | [email protected]

www.taxmann.com