New Income Tax Rules: Capital Gains, Share Buybacks, and TDS Codes - What New ITR Rules Means For You

New Income Tax Rules: The Central Board of Direct Taxes (CBDT) has released Notification No. 42/2025, dated May 1, 2025, announcing the updated Income Tax Return (ITR) Form 5 for the Assessment Year 2025-26.

This form is mainly used by firms, LLPs, and certain other entities. The latest changes aim to bring more clarity and transparency to tax reporting.

Here are the major updates and how they may impact taxpayers:

Capital Gains Reporting Split

A new structure in the Schedule-Capital Gain section now requires taxpayers to separately report capital gains earned before and after July 23, 2024.

This change comes in line with updates introduced in the Finance Act, 2024, and will help the Income Tax Department assess tax liability more accurately based on when the gain occurred.

Reporting of Capital Loss on Share Buybacks

Taxpayers can now report capital loss from share buybacks, but only if the related dividend income is declared as "income from other sources."

This is applicable for transactions carried out on or after October 1, 2024. This condition ensures that income and related losses are both correctly accounted for.

New Reference to Section 44BBC

The form now includes a reference to Section 44BBC, which relates to businesses involved in operating cruise ships. Entities in this sector must ensure they report their income in line with this provision.

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TDS Section Code Required

Taxpayers must now mention the specific TDS section code in the Schedule-TDS. This will help in avoiding errors and ensuring that tax credits are correctly matched during processing.

New 'e-Pay Tax' Feature

The Income Tax Department has also launched an ‘e-Pay Tax’ feature on its online portal. This aims to simplify tax payments and other related processes for taxpayers.

New Income-tax Act

In the July 2024 Budget, the government announced plans to revamp the Income-tax Act of 1961. The goal is to make the law shorter, clearer, and easier to understand, which will help reduce confusion and legal disputes.

On March 25, Finance Minister Nirmala Sitharaman said that the new Income Tax Bill will be discussed during the monsoon session of Parliament.

Earlier, on March 18, the government invited public feedback and suggestions on the draft Income Tax Bill 2025. Right now, the Bill is being closely reviewed by a Select Committee.