Introduction
The Finance Act, 2022, introduced Section 139(8A) in the Income-tax Act, 1961, allowing taxpayers to file an Updated Return (ITR-U) to rectify errors, omissions, or discrepancies in previously filed returns. Effective April 1, 2022, this provision enables voluntary correction, improving tax compliance and minimizing legal risks.
To standardize the process, the Central Board of Direct Taxes (CBDT) issued Rule 12AC, prescribing the filing format and procedures via Form ITR-U, as notified in Notification No. 48/2022 dated April 29, 2022. This initiative allows taxpayers to disclose unreported income, correct misstatements, and reduce tax disputes, reinforcing trust and transparency in the tax system.
This guide provides a comprehensive step-by-step breakdown of the Updated Return filing process, covering eligibility, time limits, tax computation, filing procedures, and legal implications. Understanding these provisions is essential for taxpayers to ensure compliance, avoid penalties, and maintain an accurate tax record under the latest income tax regulations.
What is an Updated Return?
- Purpose: The primary goal is to encourage taxpayers to voluntarily report unaccounted income or rectify errors in their earlier tax filings.
- Who Can File: This option is available to all taxpayers, except in cases where specific restrictions apply.
- Voluntary Filing: Filing an Updated Return is entirely optional, allowing taxpayers to choose whether to correct or update their tax returns.
Why Should Taxpayers File an Updated Return, and When is it Applicable?
Filing an updated return under the provisions of the Income Tax Act, 1961, is a significant opportunity for taxpayers to ensure compliance and rectify errors in their tax filings. Here’s a comprehensive look at why and when taxpayers should consider filing an updated return:
Why Should Taxpayers File an Updated Return?
An updated return enables taxpayers to voluntarily correct discrepancies or omissions in their previous filings. Common reasons for filing include:
- Disclosure of Omitted Income:
If a taxpayer inadvertently failed to disclose certain income during the original filing, they can use an updated return to report it and comply with legal requirements. - Correction of Errors:
Mistakes such as misclassifying income, selecting the wrong head of income, or using incorrect tax rates can be rectified. - Filing Missed Returns:
Individuals who did not file their return during the original, belated, or revised filing windows can regularize their compliance through an updated return. - Adjustment of Carry-Forward Benefits:
Taxpayers can amend errors related to carried-forward losses or unabsorbed depreciation from previous filings. - Reduction of MAT/AMT Credits:
Errors in the computation of Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) credits can also be addressed.
When Should a Taxpayer File an Updated Return?
An updated return can be filed in the following scenarios:
- If an error or omission is identified in the original, belated, or revised return.
- If the identified issue results in additional income and an additional tax liability.
Key Conditions and Timeline:
- Eligibility: Any taxpayer, regardless of whether they filed an original, belated, or revised return—or missed filing altogether—can file an updated return.
- Time Limit: The updated return must be filed within two years from the end of the relevant assessment year.
- Proof of Payment: The return must be accompanied by proof of payment of tax, interest, and fee as required under Section 140B of the Income Tax Act.
Why Filing an Updated Return Matters?
Understanding the Time Limits for Filing Updated Returns Under Indian Tax Law
The Income Tax Act provides taxpayers with the opportunity to file an updated return within a period of 24 months from the end of the relevant assessment year. This extended window ensures that taxpayers have sufficient time to review their earlier filings, correct any discrepancies, and ensure compliance with tax laws. Here’s a detailed overview of the time limits and applicable penalties for filing an updated return:
Time Frame for Filing Updated Returns
- Up to 12 Months:
If the taxpayer files the updated return within 12 months from the end of the relevant assessment year, an additional tax of 25% of the total tax and interest due must be paid. - Between 12 and 24 Months:
If the updated return is filed after 12 months but before 24 months from the end of the relevant assessment year, the taxpayer will be liable to pay 50% additional tax on the aggregate tax and interest.
Example
For taxpayers filing returns for the following assessment years:
- Assessment Year (AY) 2022-23: Updated returns can be filed until March 31, 2025.
- Assessment Year (AY) 2023-24: Updated returns can be filed until March 31, 2026.
- Assessment Year (AY) 2024-25: Updated returns can be filed until March 31, 2027
Where Filing an Updated Return is Not Allowed?
While filing a updated return provides a valuable opportunity for taxpayers to correct errors or omissions, there are certain situations where this option is not available. According to the Income Tax Act, the following conditions prevent a taxpayer from filing an updated return:
- Claiming a Refund:
If the updated return results in an increase in the refund previously claimed, it cannot be filed. Updated returns are not allowed to revise or enhance refund claims. - Reducing Tax Liability:
If the updated return leads to a reduction in the tax liability that was originally declared, it is not permitted. The intention of the updated return is not to lower the tax dues already acknowledged but to correct genuine errors or omissions. - Increasing Losses:
Similarly, if the updated return is filed to increase the losses previously declared, it will not be accepted. Losses can’t be increased in the updated return beyond what was initially reported.
Can an Updated Return Be Further Updated?
Under the provisions of the Income Tax Act, once a taxpayer has filed an updated return for a specific assessment year, they cannot file another updated return for the same year. This means that taxpayers are allowed to make only one update to their return under the current provisions. After submitting the updated return, no further amendments can be made for that assessment year under this section.
Reasons for Filing an Updated Return (Form U)
When filing an updated return in Form U, taxpayers must provide a valid reason for updating their income details. The following are the accepted reasons for filing an updated return:
- Incorrect Income Reporting:
The income was not reported correctly in the original return. - Missed Filing:
The return was not filed previously for the assessment year. - Incorrect Reporting of Income:
The income was reported inaccurately or incompletely in the earlier filing. - Wrong Head of Income:
The wrong head of income was chosen in the original return. - Adjustment in Carry-Forward Losses:
The taxpayer needs to make adjustments in the carry-forward losses. - Unabsorbed Depreciation:
The taxpayer wishes to adjust unabsorbed depreciation. - Tax Credit Issues (Section 115JB/115JC):
The taxpayer needs to correct the tax credit under Sections 115JB/115JC (MAT/AMT credit). - Incorrect Tax Rate:
The wrong rate of tax was applied in the initial return. - Other Reasons:
Any other valid reason, as specified by the taxpayer.
Which taxpayers are not eligible to file updated Return u/s 139(8A)?
Taxpayers cannot file an updated return if they fall into any of the following categories:
- Involvement in Survey (Section 133A)
Taxpayers whose assessment year has been subject to a survey under Section 133A are ineligible to file an updated return. However, this restriction does not apply if the survey was conducted specifically for TDS/TCS compliance under Section 133A(2A). - Search under Section 132
If a search has been initiated for that assessment year under Section 132, the taxpayer cannot file an updated return. - Requisition of Books or Assets (Section 132A/132)
Taxpayers who have had their books of account or assets requisitioned under Sections 132A or 132 are not allowed to file an updated return for that year. - Ongoing or Completed Assessments
If the taxpayer’s case is under any ongoing assessment, reassessment, or revision proceedings, or if such proceedings have been completed, they are prohibited from filing an updated return. - Prosecution Proceedings
Taxpayers under prosecution proceedings as per Chapter XXII of the Income Tax Act are not eligible to file an updated return. - Information Under International Agreements (Sections 90/90A)
If the taxpayer has received any information under agreements under Sections 90 or 90A (dealing with international tax matters), and such information has been communicated to them, they cannot file an updated return. - Material Received Under Other Acts
If the Assessing Officer has received information or material under laws like the Prevention of Money Laundering Act (PMLA), the Black Money Act, or the Benami Transactions Act, and it has been communicated to the taxpayer, they are ineligible to file an updated return.
Format for computation of tax payable under updated Return
| Particulars | Amount in ` |
| Tax on Total Income | xxxxxxx |
| Less: Tax Deducted at Source (TDS) | (xxxx) |
| Less: Tax Collected at Source (TCS) | (xxxx) |
| Less: Advance Tax | (xxxx) |
| Less: Self-Assessment Tax | (xxxx) |
| Less: Tax credit u/s 115JAA/115JD | (xxxx) |
| Less: Relief u/s 89/90/90A/91 (if applicable) | (xxxx) |
| Net Tax Payable | xxxxx |
| Add: 25%/50% additional tax payable u/s 140B | xxxx |
| Total Tax Payable including additional tax | xxxxx |
Note:
- The figures for tax include interest, cess, and surcharge, if applicable.
- Penalty under Section 234F will be applicable only if the return under Section 139(1) was not filed.
Step-by-Step Procedure for Filing an Updated Return under Section 139(8A)
Filing an updated return under Section 139(8A) provides taxpayers the opportunity to rectify any errors or omissions in their previously filed returns. The process involves certain steps that ensure proper compliance with the Income Tax Act.
Step 1: Select the Correct Form
- To file an updated return, taxpayers must use Form ITR-U as prescribed under Rule 12AC of the Income Tax Rules.
- Additionally, taxpayers must complete the necessary schedules, such as Part A Gen_139(8A), which provides basic details of the taxpayer, and Part B ATI, which includes adjustments to the income and tax computation.
Step 2: Choose the Appropriate Filing Method
- Updated returns must be filed electronically. Taxpayers can choose one of the following methods for verification:
- Digital Signature Certificate (DSC): This is mandatory for companies, political parties, and individuals whose accounts are audited under Section 44AB, except those filing ITR-7.
- Electronic Verification Code (EVC): This method is available for individual taxpayers and other non-audited entities.
Step 3: Provide Comprehensive Disclosures
When filing the updated return, the following details must be disclosed:
- Basic Information: This includes the PAN, name, Aadhaar number, and contact details of the taxpayer.
- Details of the Previously Filed Return: Include the section under which the return was filed, the form used, acknowledgment number, and the original filing date.
- Reasons for the Update: A clear and valid explanation for why the return is being updated is required.
- Income Adjustments: Report any additional income, categorized by the respective heads of income.
- Tax Computation: Provide detailed tax computations, including the amount of tax payable, interest, and any additional taxes applicable.
Step 4: Make the Necessary Payments
- Normal Tax: Pay the tax based on the updated calculation, which may differ from the original return due to income adjustments.
- Interest: If there was a delay in paying advance tax or self-assessment tax, the relevant interest will need to be paid under Section 234B/234C.
- Additional Tax: Depending on the filing date, an additional tax will be applicable. The tax rate is 25% if the updated return is filed within a year of the due date and 50% if filed after one year but before two years.
Step 5: Submit and Verify the Return
After completing the return, the taxpayer must submit the updated return electronically on the Income Tax Department’s e-filing portal (https://incometaxindiaefiling.gov.in/).
- Verification can be done using DSC for eligible entities or EVC for individuals and others.
Conclusion: Stay Ahead with Tax Compliance and Updates
Filing an Updated Return under Section 139(8A) offers a valuable opportunity to rectify past mistakes and align your tax filings with the latest income tax regulations. By taking advantage of this provision, you not only ensure compliance but also minimize potential penalties and safeguard your tax record for the future. Whether you need to report omitted income, correct errors, or adjust tax credits, this process allows you to take control of your tax situation with confidence.
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