Guidance Note on Form 5

Form 5 is an Income-tax Form used by an assessee claiming deduction for preliminary expenses under Section 44(3) of the Income-tax Act, 2025, and is required to be furnished as a statement of particulars in accordance with Rule 27.

Purpose of Form 5

The primary purpose of filing Form 5 is to:

• Furnish a statement of preliminary expenses incurred in connection with setting up or extension of business
• Support claims of deduction under Section 44(2)(a) of the Income-tax Act, 2025
• Provide transaction-level disclosure of qualifying project and feasibility expenditure
• Enable audit trail, verification, and compliance monitoring
• Strengthen transparency, accountability, and revenue safeguards

Filing Requirements

(i) Who can file: Any assessee claiming deduction under Section 44 of the Income-tax Act, 2025, including:

• Individuals
• Firms
• Companies
• Trusts
• Other eligible persons

(ii) Who must furnish the Form: Form 5 is furnished by the assessee or authorized signatory and does not require accountant certification, unlike Form FN 006 [3AE].

(iii) When to file: Form 5 must be furnished one month prior to the due date for filing the return of income for the relevant Tax Year, as prescribed under Section 263(1).

(iv) How to file: The Form must be filed electronically through the Income-tax e-Filing Portal and verified using:

• Digital Signature Certificate (DSC), or
• Electronic Verification Code (EVC)

Information Required in Form 5

Part A — Particulars of the Assessee

• Name
• PAN
• Address
• Status
• Email ID
• Contact Number
• Tax Year

Part B — Details of Preliminary Expenses

The Form requires reporting of qualifying preliminary expenses, including:

• Preparation of feasibility report
• Preparation of project report
• Conduct of market or business survey
• Engineering services relating to business

For each category, the following details must be disclosed:

• Nature of activity
• Whether carried out by the assessee or an external party
• Name and PAN of the service provider
• Amount paid or credited
• TDS applicability and amount deducted (if applicable)

If the assessee undertakes the activity itself, “SELF” must be reported.

Frequency and Due Date

Frequency: Form 5 must be filed for each Tax Year in which deduction under Section 44 is claimed.

Due Date: One month prior to the due date of filing the return of income under Section 263(1).

Documents Required

Although no attachment is required, the assessee should maintain:

• Bills and invoices
• Consultant or service provider agreements
• Proof of payments
• TDS challans and certificates (if applicable)
• Accounting records supporting expenditure
• Project feasibility and technical reports

These may be required for assessment, audit, or verification.

Process Flow of Filing

• Assessee compiles preliminary expenditure records
• Assessee verifies qualifying nature of expenses
• Statement is prepared in Form 5
• Form is uploaded on the Income-tax e-Filing Portal
• Assessee verifies the Form using DSC/EVC
• Electronic acknowledgement is generated

Integration Note: Form 5 serves as a pre-requisite statement for audit certification in Form 6

Key Points to Note

• Filing of Form 5 is mandatory for claiming deduction under Section 44
• Incorrect or incomplete reporting may result in disallowance of deduction
• PAN and TDS details of service providers must be accurate
• Expenses must strictly fall within the scope of Section 44(2)(a)
• Multi-vendor activities must be reported separately
• Records must be retained for verification and audit

Outcome Details

Allowability of Deduction: Form 5 forms the statutory basis for determining eligibility of preliminary expense deductions.

System-Based Verification: Filed data is subject to backend validations, risk filters, and automated compliance checks.

Revenue Assurance: Structured reporting strengthens audit trails and reduces dispute risk.

Challenges and Compliance Enhancements

The revised Form 5 is structured as a smart e-Form designed to improve compliance through:

• Auto-population of taxpayer master details
• Real-time data validation and field controls
• Standardization of expenditure classification
• Improved integration with audit and deduction workflows

Common Changes Across Revised Forms

• Use of “Tax Year” instead of Assessment/Previous Year
• Updated statutory references under the Income-tax Act, 2025
• Strengthened digital verification mechanisms
• Improved data consistency across audit-linked Forms

Summary

Form 5 is a mandatory electronic compliance statement for taxpayers claiming deduction of preliminary business expenses under Section 44 of the Income-tax Act, 2025. Accurate and timely filing ensures deduction eligibility, strengthens audit credibility, and minimizes litigation and compliance risk.