Difference Between ITR-5 and ITR-6 for Partnership vs Company

The Income Tax Return (ITR) forms are designed to cater to various types of taxpayers, including individuals, companies, and other entities like partnership firms. For businesses, the ITR-5 and ITR-6 forms are specifically designed for partnership firms and companies respectively. Filing the correct form ensures compliance with tax regulations and avoids errors that may lead to penalties or audits. Let us look at ITR-5 and ITR-6, their differences, eligibility requirements, recent updates, and the filing process, helping businesses file their returns accurately and on time.

---

Table of Contents:

• ITR-5: Filing for Partnership Firms and Similar Entities

• ITR-6: Filing for Companies

• Key Differences Between ITR-5 and ITR-6

• Who Can and Cannot File ITR-5 and ITR-6

• Audit and Compliance Requirements for ITR-5 and ITR-6

• Recent Updates to ITR-5 and ITR-6 for AY 2025–26

• Conclusion

• FAQs

---

ITR-5: Filing for Partnership Firms and Similar Entities

ITR-5 is specifically designed for partnership firms, limited liability partnerships (LLPs), and other similar entities. These businesses need to file ITR-5 to report their income, deductions, and liabilities. The form is also used by cooperative societies, LLPs, and firms that are not required to audit their financial statements.

For partnership firms, the ITR-5 form includes sections for reporting business income, deductions, capital gains, and other relevant details. The form also includes fields to disclose information about partners, share of income, and the partnership agreement. This ensures transparency in the tax filing process and helps the tax authorities assess the firm's tax liability based on its financial activities.

ITR-6: Filing for Companies

ITR-6 is designed for companies, including both domestic and foreign companies, that are required to file an income tax return under Section 139(1) of the Income Tax Act. This form is used by companies to report their financial details, including income, expenses, assets, liabilities, and other necessary information required by the Income Tax Department.

ITR-6 is crucial for companies involved in business activities as it includes sections for reporting their profits, deductions, and other details that determine their tax liability. Unlike individual tax returns, companies need to follow specific rules and regulations for tax filings, such as the applicability of corporate tax rates, transfer pricing, and dividend distribution tax (DDT), which are all covered in ITR-6.

Key Differences Between ITR-5 and ITR-6

ITR-5 and ITR-6 serve different types of entities, and while both require detailed financial reporting, there are key differences in their structure and content:

• Entity Type: ITR-5 is for partnership firms, LLPs, and similar entities, while ITR-6 is specifically for companies.
  

• Audit Requirements: Companies filing ITR-6 may need to submit audited financial statements, while smaller entities (like non-audited partnership firms) filing ITR-5 may not be subject to such requirements.
  

• Profit and Loss Reporting: ITR-6 requires companies to provide a detailed profit and loss statement, along with a balance sheet, while ITR-5 focuses on the income and capital distribution of partnerships.
  

• Tax Treatments: Companies under ITR-6 must account for corporate tax regulations such as dividend distribution tax, while partnership firms filing ITR-5 focus on profit-sharing among partners and the overall business income.

These differences make it essential to choose the correct form for accurate tax filing and compliance.

Who Can and Cannot File ITR-5 and ITR-6

ITR-5 is designed for partnership firms, LLPs, and certain other types of entities that do not fall under the category of corporations. It can also be used by cooperative societies and firms that are not mandated to undergo a statutory audit. Importantly, individuals and companies cannot use this form, and it should only be used by those engaged in business or professional activities.

ITR-6, on the other hand, is for companies. This includes private and public companies, foreign companies, and others that are involved in business activities and are registered as legal entities. Sole proprietorships and partnerships cannot file ITR-6. It is only for entities classified as companies under the Income Tax Act.

Audit and Compliance Requirements for ITR-5 and ITR-6

Filing ITR-5 or ITR-6 comes with specific audit and compliance requirements:

• ITR-5 (Partnership Firms and Similar Entities): Generally, partnership firms filing ITR-5 are not required to undergo a tax audit unless their turnover exceeds the threshold set by the Income Tax Department (currently ₹1 crore for businesses). However, LLPs and firms that are subject to tax audits must provide audited financial statements along with their returns.
  

• ITR-6 (Companies): All companies are required to file audited financial statements along with their ITR-6, irrespective of their turnover. A tax audit is mandatory for companies as per the provisions of the Income Tax Act. Companies must also comply with additional regulatory requirements, including transfer pricing regulations, foreign company reporting, and dividend distribution tax.

Both forms require the disclosure of a wide range of financial information, including profits, losses, expenses, and income sources, all of which must be validated and submitted in accordance with tax laws.

Recent Updates to ITR-5 and ITR-6 for AY 2025-26

For the Assessment Year (AY) 2025-26, there have been several updates to both ITR-5 and ITR-6 forms to comply with the latest tax laws and ensure better transparency. These updates include:

• ITR-5: The latest update includes new sections to capture additional income from digital assets, cryptocurrency transactions, and other emerging income streams. There is also improved clarity on capital gains reporting for partnership firms and enhanced fields for reporting partner details.
  

• ITR-6: The ITR-6 form for AY 2025-26 has been updated to include specific fields for reporting international financial transactions, foreign income, and transfer pricing details. Additionally, the form includes enhanced sections to accommodate the new tax rules and provide greater clarity on tax compliance for companies involved in cross-border transactions.

Both forms have been streamlined to reduce the complexity of tax filing for entities, while ensuring greater alignment with the changing tax landscape.

Conclusion

Filing the correct ITR form—whether ITR-5 for partnership firms or ITR-6 for companies—is crucial for tax compliance. Both forms come with specific requirements, and it’s essential for taxpayers to choose the appropriate form to avoid mistakes that could lead to penalties. Recent updates to these forms ensure that businesses and professionals can file accurately, even as new tax rules come into play. Given the complexity of filing for entities like partnerships and companies, professional assistance can prove valuable in ensuring compliance and minimizing errors. For those looking for an efficient, hassle-free filing experience, it is highly recommended to download theTaxBuddy mobile app for seamless and secure tax filing.

FAQs

Q1: Can a partnership firm file ITR-6 instead of ITR-5?

No, a partnership firm cannot file ITR-6. ITR-6 is specifically designed for companies, including those that are required to pay taxes under the provisions of the Companies Act. A partnership firm, on the other hand, must file ITR-5, which is tailored to meet the income and reporting requirements specific to partnerships, LLPs, and other unincorporated entities. Using the incorrect form, such as filing ITR-6 for a partnership firm, can result in the return being considered invalid and could attract penalties.

Q2: What are the key differences between ITR-5 and ITR-6?

ITR-5 is meant for partnership firms, Limited Liability Partnerships (LLPs), and similar unincorporated businesses. It requires reporting of income from business, profession, and capital gains, but it doesn't require reporting of certain corporate-specific transactions such as those related to share capital or dividends. ITR-6, however, is designed for companies and includes additional fields for corporate income, tax credits, dividend distribution tax, and transfer pricing disclosures. The form also mandates that companies must file audited financial statements, which is not a requirement for ITR-5 filers unless the partnership is subject to a statutory audit.

Q3: Do I need to file audited financial statements with ITR-5?

Generally, partnership firms filing ITR-5 do not need to submit audited financial statements unless their annual turnover exceeds the prescribed threshold for mandatory audit under Section 44AB of the Income Tax Act. If the firm's turnover is below this limit, they can file the return with the financial statements based on the self-prepared accounts. However, if the firm’s turnover exceeds the threshold, then the partnership is required to have its accounts audited and submit the audited statements along with the return.

Q4: What happens if a company files ITR-5 instead of ITR-6?

If a company mistakenly files ITR-5 instead of the appropriate ITR-6, the return will be considered incorrect, as ITR-5 is meant for partnerships and LLPs, not for corporate entities. As a result, the company may face penalties for incorrect filing and be required to refile using the correct form. The Income Tax Department may not process the return and may issue a notice requesting the filing of the correct form. Corrective actions must be taken within the prescribed time to avoid further complications.

Q5: Are there any specific compliance requirements for ITR-6 filers?

Yes, there are specific compliance requirements for companies filing ITR-6. Companies must attach audited financial statements to the return, including the balance sheet, profit and loss account, and any additional schedules or disclosures required by the Income Tax Act. They must also ensure compliance with transfer pricing regulations (for companies dealing in international transactions) and report dividend distribution tax if applicable. Further, ITR-6 filers must also comply with the latest provisions related to capital gains, depreciation, and other corporate tax adjustments as prescribed under the Act.

Q6: Can I file ITR-5 if my partnership firm is not required to audit its financials?

Yes, if your partnership firm is not required to undergo a statutory audit (because it has not exceeded the prescribed turnover limit), you can file ITR-5 without submitting audited financial statements. However, it is important to ensure that your financial statements are accurate and comprehensive, as the Income Tax Department may request additional documentation or information. If your partnership firm exceeds the audit threshold, you will need to have the accounts audited and submit the audited financials along with the return.

Q7: What are the penalties for filing the wrong ITR form?

Filing the wrong ITR form, such as a company filing ITR-5 instead of ITR-6, can lead to penalties and a demand for a corrected filing. Penalties for incorrect filing can include fines up to ₹5,000, and the taxpayer may also be subject to interest charges for any unpaid tax liabilities. Moreover, filing the wrong form can delay the processing of your return and any refunds due, as the Department may not process the return until the correct form is filed.

Q8: Can a company file ITR-4 instead of ITR-6?

No, ITR-4 is specifically designed for individuals, Hindu Undivided Families (HUFs), and small businesses opting for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE. It is not meant for companies, which must file ITR-6. Filing ITR-4 instead of ITR-6 can result in rejection of the return and penalties for incorrect filing.

Q9: What documents are required to file ITR-6?

For filing ITR-6, companies must attach their audited financial statements, which include the balance sheet, profit and loss account, and any other schedules or reports required by the Income Tax Act. In addition, companies need to provide details of corporate tax payments, dividend distribution tax (if applicable), and any applicable transfer pricing reports if the company has international transactions. The company must also disclose the income, deductions, and adjustments as per the Income Tax Act.

Q10: Can an LLP file ITR-6 instead of ITR-5?

No, an LLP (Limited Liability Partnership) must file ITR-5, as it is specifically meant for unincorporated entities such as partnerships and LLPs. Filing ITR-6, which is intended for companies, would lead to incorrect filing and potential penalties. An LLP cannot file ITR-6, as it is not a corporate entity but a partnership structure.

Q11: Is GST registration mandatory for ITR-5 filers?

GST registration is not mandatory for all ITR-5 filers. It depends on the turnover of the partnership firm. If the partnership firm’s turnover exceeds the threshold limit for GST registration under the Goods and Services Tax Act, then it must register for GST. Even if a partnership firm is not required to register for GST, it must still comply with the tax reporting requirements under the Income Tax Act.

Q12: Can I make corrections to ITR-5 after filing?

Yes, you can file a revised return if you realize there were errors or omissions in your original ITR-5 filing. To do so, you must file the revised return using the same form and include the correct information. You can revise your return up to the end of the assessment year. The revised return should include all the correct details to avoid any further scrutiny or penalties. If you realize an error after the assessment year has passed, you may not be able to revise the return, but you should consult with a tax professional to understand your options.