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After the Finance Act 2022, the finance ministry allowed taxpayers to rectify their ITRs within two years from the end of the relevant assessment year.
The income tax department allows individuals to file an updated return under Section 139(8A) of the Income Tax Act within two years.
The deadline for filing updated income tax returns (ITR-U) for the financial years 2021-22 (FY22) and 2022-23 (FY23) is fast approaching. Taxpayers who missed reporting income, made errors in their original returns, or failed to file their ITR earlier still have a chance to correct their records. After the Finance Act 2022, the finance ministry allowed taxpayers to rectify their ITRs within two years from the end of the relevant assessment year.
The income tax department allows individuals to file an updated return under Section 139(8A) of the Income Tax Act within two years.
What is An Updated Return?
An updated return (ITR-U) allows taxpayers to correct any omissions or mistakes made in their previously filed ITRs. This provision is particularly beneficial for individuals who:
– Forgot to disclose certain income sources, such as interest from fixed deposits or freelance earnings.
– Incorrectly claimed deductions or exemptions.
– Did not file their ITR within the due date and now wish to comply with tax regulations.
Who Can File An Updated Return?
Any taxpayer who has already filed their original return but needs to rectify errors can file an updated return. Additionally, those who failed to file their return in the respective assessment years can also take advantage of this facility. However, an ITR-U cannot be filed if:
– It leads to a lower tax liability or an increased refund claim.
– The tax department has already initiated an assessment or investigation against the taxpayer.
– The return includes undisclosed income from illegal sources.
Penalty and Additional Tax
Filing an updated return is not free of cost. Taxpayers must pay an additional tax along with interest and penalties. The additional tax is calculated as:
– 25% of the tax due if the updated return is filed within 12 months from the end of the relevant assessment year.
– 50% of the tax due if filed after 12 months but before 24 months.
For instance, if an individual wants to update their ITR for FY22 (Assessment Year 2022-23), they must file it before March 31, 2024, with an additional tax of 50%, as it exceeds the 12-month period.
However, the Union Budget 2024-25 has allowed taxpayers to filed updated ITRs for the previous four years. In that case, the following charges will be applied for the two additional years.
– 60% of the tax due if filed 36 months from the end of the relevant assessment year.
– 70% of the additional tax if the ITR-U is filed after 48 months from the end of the relevant assessment
How To File An Updated Return?
Filing an ITR-U is a straightforward process:
1. Login to the e-filing portal of the Income Tax Department.
2. Select ‘ITR-U’ under the ‘Income Tax Returns’ section.
3. Choose the assessment year for which you wish to file the updated return.
4. Provide reasons for filing an updated return (e.g., omitted income, incorrect deductions).
5. Calculate and pay the additional tax before submitting the return.
6. Submit the updated return and keep the acknowledgment for future reference.
Who Cannot File ITR-U Under Section 139(8A)?
An updated income tax return (ITR-U) cannot be filed in the following situations:
- If you have already submitted an updated return.
- If you intend to file a nil return or report a loss.
- If the purpose is to claim or increase a tax refund.
- If filing the updated return leads to a reduced tax liability.
- If search proceedings under Section 132 have been initiated against you.
- If a survey has been conducted under Section 133A.
- If books of accounts, documents, or assets have been seized or requisitioned under Section 132A.
- If an assessment, reassessment, revision, or recomputation is either pending or has been completed.
- If there is no additional tax liability (i.e., the tax liability is fully offset by TDS credits or losses).
How Does An Updated Return Help?
Filing an updated return ensures compliance with tax laws and helps taxpayers avoid legal complications. It also minimises the chances of scrutiny and penalties in case of undisclosed income being detected later. More importantly, it offers an opportunity to correct financial records and maintain transparency with the tax authorities.
