The deadline for submitting an updated income tax return (ITR) for the financial year 2020-21 is approaching on 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.
An updated return can be filed within 24 months (two years) from the end of the relevant assessment year (subject to certain conditions).
Hence, if taxpayers missed filing it for FY2020-21, they can do the same now till March 31.
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.
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.
The computation of tax payable for an updated return includes the total income tax liability, encompassing tax payable, interest, late filing fees, and additional tax. The net tax liability is then calculated by subtracting TDS/TCS/advance tax/tax relief from the total income tax liability.
Filing an ITR is a crucial annual activity under income tax laws, viewed as a civic duty. Individuals can claim a refund of excess tax paid/deducted during a financial year by completing this process.
For those who fail to file ITR, they won't be able to carry forward losses of the current assessment year.
Further, they may face penalties ranging from a minimum of 50% to a maximum of 200% of the assessed tax. In extreme cases, individuals may also be subject to prosecution. Therefore, it is imperative for taxpayers to adhere to the deadline and fulfil their ITR filing obligations.
