File updated ITR before March 31 deadline: Here's how
What's the story
The Income Tax Department has launched a new form, ITR-U, for taxpayers to file updated Income Tax Returns (ITR).
Under Section 139(8A) of the Income Tax Act, 1961, taxpayers can file an updated return using Form ITR-U.
This provision allows individuals to submit a return if it was not filed earlier, rectify errors in their previous disclosures, modify the head under which income is reported and reduce carry-forward losses among other things.
Filing process
Filing updated ITR-U: A step-by-step guide
Taxpayers can file the ITR-U form within two years from the end of the relevant assessment year.
Valid reasons must be given for filing an updated return, including cases where a return was not filed earlier.
These include cases where income was wrongly reported, wrong heads of income were selected, or carried forward losses were reduced.
The updated return (ITR-U) has to be furnished along with an updated version of the applicable ITR form (ITR 1 - 7).
Deadline extension
Extended deadline for filing updated ITR
The current deadline to file an updated ITR for FY 2021-22 (AY 2022-23) is March 31, 2025.
In her eighth budget speech on February 1 this year, Finance Minister Nirmala Sitharaman proposed extending the time limit to file updated returns from the current limit of two years to four years.
This extension would give taxpayers more time and flexibility in managing their tax obligations.
Penalties explained
Penalties for late submission of updated ITR
As per proposed norms, taxpayers will incur additional tax penalties of 60% if the return is filed between 24-36 months after the assessment year ends, and 70% if filed between 36-48 months.
Filing an updated income tax return within a shorter time frame means lower tax incidence.
If filed before 12 months from the end of assessment year, additional tax payable is 25%, and it increases to 50% if filed within 12-24 months.
Tax implications
Consequences of not reporting additional income
If a taxpayer doesn't report additional income within the four-year period, they won't be able to do so anymore.
In such cases, a tax penalty of up to 200% of the tax payable amount can be levied.
This highlights the importance of timely and accurate reporting of income for taxpayers to avoid harsh penalties.