reporting.
Capital Gains Reporting Now Split by Transaction Date
A major change has been introduced in Schedule CG, where capital gains must now be reported in two segments—based on the date of the transaction:
- Transactions before July 23, 2024: Covered under the previous tax regime.
- Transactions on or after July 23, 2024: Governed by the amended provisions under the Finance Act.
This split allows for appropriate tax treatment in line with legislative updates and gives tax officials a clearer audit trail for assessment.
Buyback Losses Tied to Dividend Disclosure
From October 1, 2024, taxpayers will only be allowed to claim losses on share buybacks if the related dividend income was reported under the head ‘Income from Other Sources.’ The move is intended to prevent misuse of buyback provisions and ensure that only substantiated claims are entertained.
Cruise Operators Brought Under Presumptive Taxation
A notable inclusion is Section 44BBC, which introduces a presumptive tax regime for cruise industry businesses. Under this new section, cruise operators can declare income based on a fixed percentage of gross receipts, reducing the need for extensive bookkeeping and compliance.
This initiative aligns with India’s strategy to boost the tourism and hospitality sector, particularly the growing cruise travel market.
TDS Section Codes Now Mandatory
In a bid to enhance accuracy in tax deduction claims, the updated ITR-5 now requires taxpayers to specify the exact section under which TDS was deducted—such as:
- Section 194A – Interest (other than on securities)
- Section 194C – Payments to contractors
- Section 194J – Professional services
This change is expected to improve data matching by the Centralized Processing Center (CPC), reducing mismatches and expediting refund processing.
Digitally Optimized and AI-Integrated Filing
The new ITR-5 is designed to integrate seamlessly with the Income Tax Department’s AI-powered scrutiny tools, improving both efficiency and oversight. The form supports smarter validations, real-time error detection, and streamlined processing—but also implies increased scrutiny and tighter compliance expectations for filers.
Expert Commentary
Tax experts have welcomed the changes as a step toward modernizing India’s tax infrastructure. "This update reflects the government’s increasing reliance on data intelligence and automation to manage compliance. It places more responsibility on taxpayers to ensure their returns are correctly filed," said a senior tax consultant from a Big Four accounting firm.
What Firms Should Do Now
Entities covered under ITR-5 are advised to:
- Reassess their capital gains classification.
- Confirm dividend declarations if claiming buyback-related losses.
- Ensure accurate TDS section mapping.
- Evaluate the benefits of presumptive taxation under Section 44BBC if operating in the cruise business.
Tax professionals suggest that firms and LLPs consult with their chartered accountants or tax advisors at the earliest to ensure timely and accurate filings under the new regime.
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