Taxpayers must file their updated Income Tax Return (ITR-U) before March 31, 2025 to rectify omissions or misreporting. This will minimise penalties and additional tax liabilities or notices from the Income Tax Department (IT dept).
The updated return provision promotes voluntary compliance and provides an opportunity to rectify genuine mistakes, thereby reducing potential litigation. Any taxpayer is eligible to file an updated return under Section 139(8A), irrespective of whether they have previously submitted an original, revised, or belated return.
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This provision applies in cases of omissions, errors, or incorrect statements in prior filings. Taxpayers can file ITR-U for FY22 (AY 2022-23), FY 23 (AY 2023-24) and FY24 (AY 2024-25) before March 31. Failure to do so within the deadline will result in a higher additional tax, which will vary based on the timeframe in which the return is filed.
As per Section 140B, filing an updated return attracts an additional tax liability of 25% of the total tax, interest, surcharge, and cess if filed within 12 months, and 50% if filed after 12 months but within 24 months from the end of the relevant assessment year. For instance, if the normal tax payable is Rs 1,000, interest is Rs 100, and cess is Rs 40, the total comes to Rs 1,140. The additional tax would be 25% of Rs 1,140, i.e., Rs 285, making the total outflow Rs 1,425 (Rs 1,140 + Rs 285).
Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm, says failing to utilise this corrective mechanism may result in subsequent tax demands, interest charges, or penalties if discrepancies are identified later during assessments. “The IT dept leverages systems such as AIS, TIS, and Form 26AS-supported by AI analytics-to monitor financial transactions, and discrepancies can trigger reassessments or notices.”
Who can file ITR-U
Introduced by the Finance Act, 2022, the concept of ITR-U under Section 139(8A) of the Income Tax Act, 1961, allows taxpayers to voluntarily correct errors or omissions in their income tax returns within two years from the end of the relevant assessment year.
An ITR-U can be filed in case of non-submission of a previous return, incorrect income declaration, selection of incorrect income heads and reduction in carried-forward losses.
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