ITR Series: Day 12: ITR-5 – A Comprehensive Return for Firms, LLPs, and Associations

If your income tax identity isn’t that of an individual or HUF—but rather a Firm, LLP, Association of Persons (AOP), Body of Individuals (BOI), or Artificial Juridical Person (AJP)—ITR-5 is the return you’ll likely need to file.

 

Let’s break down this sophisticated return form.

 

Who Can File ITR-5?

ITR-5 is applicable to entities like:

• Partnership Firms 
• LLPs (Limited Liability Partnerships)
• AOPs (Association of Persons)
• BOIs (Body of Individuals)
• Artificial Juridical Persons (AJPs)
• Business Trusts and Investment Funds (as defined under Section 139(4F))
• Estate of deceased or insolvent (if not being taxed as individual/HUF)

Who Cannot File ITR-5?

You cannot file ITR-5 if you are:

• An individual or HUF (use ITR-1 to ITR-4 as applicable)
• A company (use ITR-6)
• A taxpayer required to file returns under Section 139(4A) to 4E (e.g., charitable trusts or political parties)

Key Structure

ITR-5 includes a wide array of sections and schedules due to the complex structures of firms and LLPs:

• Part A – General Information (basic data, filing status, business nature)
• Part B – TI & Tax Computation (Total Income & Tax calculation)
• Schedule BP – Income from Business or Profession
• Schedule DPM/DOA/DEP – Depreciation on assets
• Schedule CG – Capital Gains
• Schedule IF – Information on partners and their profit-sharing ratios
• Schedule AL – Assets & Liabilities (mandatory if income > INR 1 crore)
• Schedule OI & QD – Other Information and Quantitative Details
• Schedules for TDS, TCS, Advance Tax, MAT/AMT, Foreign Income/Assets
• Verification & Bank Details

Key Points 

• Tax Audit: Mandatory for firms/LLPs with turnover above INR 1 crore (or INR 10 crore if 95%+ digital transactions).
• Presumptive Taxation: Firms (not LLPs) can opt for 44AD if turnover < INR 2 crore.
• Capital Account Reconciliation: Required for partners, with details of drawings, interest, and profit.
• Schedule AL Accuracy: Required for income above INR 1 crore, ensure assets, loans, and liabilities match books.
• No MAT for LLPs, but AMT provisions apply.

Why ITR-5 is Considered Complex?

• Involves multiple entities and partners, each with different roles and profit-sharing.
• Requires extensive reporting, from depreciation schedules to foreign asset disclosure.
• A single mistake in capital account reconciliation or profit allocation can trigger scrutiny.
• Detailed P&L and Balance Sheet as per Income Tax Act, can differ from Companies Act books.

Bonus: Know the Entities Behind ITR-5

ITR-5 is not just for firms and LLPs,it also covers entities like AOP, BOI, and AJP. Here’s a simple breakdown:

 

• AOP – Association of Persons : When two or more people come together to earn income without forming a formal partnership or company.

Example : Two friends run a tiffin service together but haven’t registered as a firm.
They act jointly with a profit motive and are taxed as a single unit.

 

• BOI – Body of Individuals :  Similar to AOP, but consists only of individuals (no companies, firms, etc.).

Example: Three siblings inherit a property and earn rent jointly.

 It’s more about involuntary grouping—like inheritance—not a business partnership.

 

• AJP – Artificial Juridical Person: Entities that are not human beings, but the law treats them like a person for tax purposes.

Example: A temple trust, university, or unregistered society that receives income and not registered under section 12AB.

They have rights and duties, can own property, and are taxable under the Act, even though they aren’t living people.

 

Final Word

ITR-5 is tailored for non-corporate entities with shared business interests. Whether you’re a partnership firm, LLP, or AOP/BOI, this form ensures all stakeholders’ incomes are accurately captured and taxed.

Precision is vital. Mistakes in capital account balances, depreciation, or presumptive income can lead to delays or compliance issues.

 

Pro Tip: 

Consider hiring a tax professional, especially if you’re managing GST, digital turnover limits, AMT, or foreign income/assets.

                                                                                                     

                                                                                  Happy Learning!!