In the Finance Act, of 2022, the Government introduced an additional facility for filing income tax returns called “Updated Return”, in addition to existing facilities like original, belated and revised returns. Updated Return is an opportunity given to taxpayers to voluntarily file their income tax return(s), if not filed earlier, or to correct the mistakes or omissions in the income tax return(s), already filed by them.
Recently, the Government has enabled the filing of Updated Return in Form ITR-U on the Income Tax portal.
Who can file an Updated Return?
Any person can file an Updated Return, irrespective of whether such person has already filed an income tax return for that year or not. However, a specific category of persons cannot file Updated Return (discussed in detail below).
It needs to be noted that the taxpayer has to select one of the following reasons while filing Form ITR-U:
- Return previously not filed;
- Income not reported correctly;
- Wrong heads of income chosen;
- Reduction of carry forward loss;
- Reduction of unabsorbed depreciation;
- Reduction of tax credit under Section115JB/115JC;
- Wrong rate of tax; or
What is the time limit for filing an Updated Return?
An Updated Return can be filed at any time within 24 months from the end of the relevant assessment year. Accordingly, Updated Return can be filed from Financial Year (FY) 2019-20 i.e., Assessment Year (AY) 2020-21 and onwards.
Is there any additional tax that the taxpayer would be required to pay while filing Updated Return?
Yes, taxpayers filing Updated Return need to pay Additional Income Tax on their outstanding taxes:
- at the rate of 25%, if the Updated Return is filed within 12 months from the end of the relevant AY; and
- at the rate of 50%, if the Updated Return is filed within 24 months from the end of the relevant AY.
The Additional Income Tax paid would be in addition to applicable interest and fees till the date of filing the Updated Return.
Further, all the taxes, additional taxes, interest, fee etc. has to be paid prior to the filing of the Updated Return and the details of such payment made have to be given in the Updated Return.
What are the circumstances under which an Updated Return cannot be filed?
An Updated Return cannot be filed in the following three circumstances:
1: Updated Return cannot be filed if it:
- is a return of loss (except in cases where it results in the reduction of loss to be carried forward); or
- results in a reduction in tax liability determined based on income tax return already filed by the taxpayer for such AY; or
- results in or increases the refund due based on income tax return already filed by the taxpayer for such AY.
2: Updated Return cannot be filed where in case of the taxpayer:
- any proceeding in relation to assessment, reassessment, re-computation, revision etc. is pending/completed for such AY;
- a search has been initiated u/s 132 of the Income Tax Act, 1961 (ITA);
- books of account / other documents / any assets are requisitioned u/s 132A of ITA;
- a survey has been conducted u/s 133A (except TDS survey u/s 133A(2A)) of the ITA;
- a notice has been issued to the effect that any money, bullion, jewellery or valuable
article or thing, or books of account or documents seized or requisitioned u/s 132 or 132A of the ITA, in the case of any other person, belongs to the taxpayer.
In cases of search, survey or requisition (as discussed above), Updated Return cannot be filed for the year in which such investigation is initiated, or survey is conducted or requisition is made and for any preceding years.
3: Updated Return cannot be filed where:
- an updated return has already been furnished by the taxpayer for such AY;
- the Assessing Officer has information under the below-mentioned laws, regarding the taxpayer and has communicated the same to the taxpayer, prior to the date of furnishing of Updated Return:
- The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976;
- The Prohibition of Benami Property Transactions Act, 1988;
- The Prevention of Money-laundering Act, 2002;
- The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- information has been received under an agreement referred to in section 90 or section 90A of ITA in respect of the taxpayer and the same has been communicated to the taxpayer, prior to the date of furnishing of Updated Return;
- any prosecution proceedings have been initiated in respect of the taxpayer, prior to the date of furnishing of Updated Return.