Income tax filing season is upon us, and for many businesses, companies, and trusts, there’s a bit of a snag: The Income Tax Department has delayed the release of ITR-5, ITR-6, and ITR-7 utilities. This delay is sparking concern, especially with the September 15, 2025 deadline for non-audit cases fast approaching.
Why the Hold-Up?
The primary reason for this delay boils down to technical integration difficulties and significant adjustments for the Assessment Year 2025-26. These adjustments include crucial changes in tax rates and reporting obligations.
According to Kinjal Bhuta, a Chartered Accountant and Treasurer at BCAS, these delays are often due to “inherent technical issues with the utility and mismatches in pre-filled returns.” He also noted that this was the reason behind recent delays for ITR-2 and ITR-3. Essentially, new sections and reporting formats in these forms are adding layers of complexity to processing and filing.
What’s Changed and Who’s Affected?
The revised reporting formats in these ITR forms require careful attention.
Key Changes to Note:
- ITR-5: Now requires documentation of buyback losses only if the related dividend has been taxed.
- ITR-6: Obliges firms to declare capital gains for transactions carried out both before and after July 23, 2024, as well as earnings from cruise operations and diamond trades.
- ITR-7: Incorporates fields for reporting capital gains and housing loan interest under Section 24(b).
Significant Tax Rate Adjustments (for AY 2025-26):
- Long-Term Capital Gains (LTCG): The tax rate has increased to 12.5% from 10%. For assets transferred on or after July 23, 2024, a uniform 12.5% tax rate applies across all asset classes, without indexation benefits. For land and buildings sold after this date, if acquired before, taxpayers can choose between 12.5% without indexation or 20% with indexation.
- Short-Term Capital Gains (STCG): The tax rate has increased to 20% from 15% for specified financial assets (like listed equity shares, equity-oriented mutual funds, and business trust units) where Securities Transaction Tax (STT) has been paid. This is effective for transfers made on or after July 23, 2024. For other assets, STCG is taxed at the applicable slab rates.
Who Uses These Forms?
- ITR-5: This form is for entities like firms, LLPs, AOPs, BOIs, Artificial Juridical Persons (AJPs), estates of deceased or insolvent individuals, business trusts, and investment funds. It’s used by those not filing under ITR-7 and not required to file ITR-6.
- ITR-6: Companies, except those claiming exemption under Section 11 (income from property held for charitable or religious purposes), must file ITR-6. It’s an electronic-only filing.
- ITR-7: Applicable to persons, including companies, who need to file returns under specific sections of the Income Tax Act, such as for trusts, political parties, scientific research associations, news agencies, certain educational or medical institutions, universities, colleges, business trusts, and investment funds.
What to Do Now?
While the delay is inconvenient, experts believe it’s a necessary step to ensure technical stability and reduce errors in the e-filing portal. The utilities are expected to arrive shortly, likely by the end of July 2025.
Here’s how to prepare:
- Gather Your Documents: Start compiling all necessary financial documents.
- Understand New Requirements: Familiarize yourself with the updated reporting formats and tax rate changes.
- Stay Informed: Keep an eye out for official updates from the Income Tax Department. This will help you avoid last-minute surprises and ensure compliance.
For those opting for manual filing, remember to verify your returns using ITR-V by sending the signed form to CPC Bengaluru within 30 days, unless you choose e-verification.
By taking a proactive approach, you can mitigate potential issues once the utilities are released and effectively navigate the evolving tax landscape.