The Ultimate ITR Guide for First-Time Taxpayers in India
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Major Changes in ITR-3 and ITR-5 for AY 2025-26: A Complete Guide for Taxpayers
05/07/2025
The Central Board of Direct Taxes (CBDT) has recently notified the revised ITR-3 and ITR-5 forms on 30-04-2025 vide notification number 41/2025 applicable for Assessment Year (AY) 2025-26, covering income earned during Financial Year (FY) 2024-25. These updates bring several significant changes aimed at aligning with the latest amendments introduced in the Finance (No. 2) Act, 2024.
In this blog, we break down the key updates in ITR-3 and ITR-5 that every Taxpayer, CA, and Tax Consultant should be aware of.
Unlike previous years, this time the ITR forms were released with a delay of over a month, instead of April it was released in the month of May 2025, leading to speculation about a possible extension in the return filing due dates, Hopefully, fingers crossed. Courts have also directed CBDT in the past to ensure timely release of utilities to avoid taxpayer inconvenience.
Let’s get back to the topic below are the key changes which we have observed in ITR-3 and ITR-5 for AY 2025-26:
Aadhaar Enrolment ID No Longer Accepted:
From 1st October 2024, Taxpayers can no longer use the Aadhaar Enrolment ID for PAN applications or for filling of ITR. The new forms ITR 3 and ITR 5 require only a valid Aadhaar number to be utilised, including that for partners, members, trustees, and beneficiaries, etc.
Detailed Disclosure for Opting Out of New Tax Regime (Section 115BAC):
In ITR Forms of earlier years, it was just selected yes/no in the question whether you are opting for 115BAC. But the updated forms requires the following detailed information :
- Confirmation of earlier filing of Form 10-IEA.
- Declaration on whether the taxpayer wishes to continue opting out of the new tax regime in the current year.
New Reporting for Section 44BBC – Cruise Shipping Business:
A new presumptive taxation scheme has been introduced for non-resident cruise operators u/s. 44BBC. The Key changes in the forms are explained below with the help of bullet points :
- Declaration under Part A-GEN about option for Section 44BBC.
- Reporting under Schedule BP for presumptive income (20% of gross receipts).
- Treated similarly to Section 44B; tax audit likely not required.
Capital Gains Tax Overhaul (From 23rd July 2024):
The Finance (No. 2) Act, 2024 removed the indexation benefit and introduced a uniform tax rate of 12.5% on long-term capital gains. As per the amendment, no indexation benefit is allowed while computing capital gain from long-term capital assets transferred on or after 23rd July, 2024. Hence, Significant changes apply to assets transferred on or after 23rd July, 2024, for simple understanding we have mentioned in short:
- Short Term Capital Gains – STCG (Section 111A): Taxed at 20% (earlier it was taxed at 15%).
- Long Term Capital Gains – LTCG (Section 112): Taxed at a flat 12.5%, without indexation.
- Long Term Capital Gains – LTCG (Section 112A): Tax rate increased from 10% to 12.5%.
- Separate reporting for transfers made before and after 23rd July 2024 is now mandatory as there was change in rate as on that date.
Unlisted Debentures/Bonds Under Section 50AA:
Gains from unlisted debentures or bonds transferred on or after 23-07-2024 are treated as short-term capital gains, regardless of the holding period. Earlier transfers still qualify for long-term treatment as usual.
Buy-Back Proceeds Now Taxable as Deemed Dividend:
Starting 1st of October, 2024, buy-back proceeds from domestic companies are to be treated as follows :
- Taxed in the shareholder’s hands under Section 2(22)(f).
- Reported as dividend income in Schedule OS as Income from Other Source.
- Capital gains considered nil, resulting in a notional capital loss.
Withdrawal of 80-IC Deduction Schedule :
As the eligibility period for Section 80-IC (manufacturing units) has ended, the corresponding schedule has been removed from ITR-3 and ITR-5.
New Reporting Options for Disability Deductions (80DD/80U) :
Taxpayers can now enter acknowledgement numbers of both :
- Form 10-IA (specific disabilities), and
- Other approved disability certificates, which was previously unavailable.
Section 115U Income Now Reportable:
Pass-through income from Venture Capital Undertakings (not covered under 115UB) is now reportable under Schedule PTI, thanks to the inclusion of Section 115U in the updated forms.
Asset & Liability (AL) Schedule Threshold Increased:
Now applicable only if total income exceeds ₹1 crore (earlier ₹50 lakh), easing compliance for mid-income taxpayers.
Mandatory Disclosure of TDS Section:
Taxpayers must now mention the TDS section (e.g., 194J, 194C) under which tax was deducted, in the Tax Payments schedule. Earlier it was not mandatory now it has become mandatory to mention the same.
Conclusion :
The revised ITR-3 and ITR-5 forms reflect significant policy changes that impact both individual and corporate taxpayers. From capital gains to dividend taxation and presumptive income provisions, these updates reinforce the need for early preparation and expert tax guidance.
As a Chartered Accountant or tax professional, it’s essential to stay ahead of these changes to ensure accurate filing and compliance.
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