With just two weeks left until the deadline, taxpayers should file their updated income tax returns (ITR) for the financial year 2020-21. The deadline for filing these updated returns is March 31, 2024.
This provision, introduced by the Finance Act of 2022, allows taxpayers who missed filing their return for the said financial year or failed to report any income to file an updated ITR or ITR-U.
It facilitates the inclusion of additional information, ensuring accuracy and compliance with tax regulations.
When can an updated return be filed?
Taxpayers can file an updated return within 24 months from the end of the relevant assessment year (subject to certain conditions).
Form and method of filing
To file an updated return, taxpayers must use the ITR forms notified for the respective assessment year along with the newly introduced form ITR-U.
Electronic filing is mandatory, with options for using Digital Signature Certificates (DSC) or Electronic Verification Code (EVC), depending on the taxpayer's category.
Reporting requirements
Taxpayers must provide details in the
updated return form, including basic information, details of earlier filings, reasons for filing the updated return, and head-wise reporting of additional income.
When to file an updated ITR
Rectifying errors or omissions: If taxpayers have discovered errors or omissions in the previously filed return, they should file an updated ITR to correct these mistakes.
Additional income disclosure: If taxpayers receive additional income after filing original returns, such as from investments or freelance work, filing an updated return allows them to report this income and fulfil the tax obligations.
Avoiding penalty: Filing an updated return promptly helps avoid penalties for non-compliance with tax laws. By rectifying discrepancies in the original return, taxpayers can demonstrate good faith in meeting their tax obligations.
Restrictions on updated return filing
Circumstances where updated return cannot be filed include:
Return of loss: Updated returns cannot be filed if they result in a net loss.
Decrease in tax liability: If an updated return reduces total tax liability compared to earlier filings, it cannot be filed.
Increased refund: Similarly, if an updated return leads to an increase in refunds beyond what was previously claimed, it cannot be submitted.
Initiation of search, survey, or seizure: Taxpayers under investigation through search, survey, or asset seizure procedures are ineligible to file updated returns until the conclusion of these proceedings.
Pending assessment or prosecution: Updated returns cannot be filed if assessment, reassessment, or prosecution proceedings are pending or have been completed.
Information under specified acts or agreements: If the taxpayer's information is already with authorities under certain acts or international agreements, updated returns cannot be filed.
Initiation of prosecution proceedings: Filing an updated return is prohibited if prosecution proceedings have commenced for the relevant assessment year.
Other notified cases: Certain specific cases, as notified by the CBDT, also restrict the filing of updated returns.Additional tax
Unlike a penalty or fee, there is no financial imposition on individuals wishing to furnish an
updated return. However, they are obligated to pay an additional tax as per Section 140B of the Income Tax Act.
If the ITR-U is filed within 12 months from the end of the relevant assessment year, a 25% additional tax on the tax dues is applicable.
If filed within 24 months, the additional tax increases to 50%, illustrating that for updating the ITR for FY2020-21, a 50% additional tax will be incurred.
The assessment year for FY2020-21 was AY2021-22.
(Edited by : Amrita)
First Published: Mar 18, 2024 11:59 AM IST
