The income tax department aims to include a majority of India’s population under the ITR filing umbrella. To achieve this, they are collecting information from various sources to understand and track the transactions made by individuals. These transactions are then disclosed in forms like the Annual Information Statement (AIS) and 26AS. However, by the time users realize they were supposed to file an ITR based on the information available in these forms or discover mistakes in their filings, the due date may have passed.
To address this issue, the Finance Minister introduced the updated return or ITR-U in the 2022 budget. With ITR-U, individuals who made mistakes while filing or missed the deadline can file an updated return.
What is ITR-U?
Any person who has submitted an original, revised, or belated return, or has not filed an ITR at all, can file ITR-U up to 24 months from the end of the relevant assessment year (AY).
For example, if you want to file an updated return on 10th Feb 2023 for AY 2020-21, you are eligible to do so. However, if you want to file the same on 10th May 2023, it is not possible because two years from the end of the relevant AY have already expired on 31st March 2023.
Who can file an updated return?
Any taxpayer, including individuals, HUFs, companies, etc., and non-residents can file an updated return.
When can you not file an updated return?
An updated return cannot be filed in the following cases:
- When the taxpayer’s total tax liability is less than initially declared.
- When there is no additional tax liability or the taxable income is below the exemption limit.
- To report/reduce losses.
- If the ITR results in a refund or increases the refund amount.
There are more such cases; you can read about them here!
For example, if a person is entitled to claim a refund of ₹25,000 and has not filed an ITR at all, they are not eligible to claim it by filing an updated ITR.
How many times can you file an updated ITR?
You can file an updated ITR only once for a particular AY.
Is there a penalty?
Yes, filing an updated return comes with penalties. You will have to bear a late filing fee of up to ₹5,000 and interest of 1% per month on the tax liability.
Moreover, if the ITR is filed up to one year from the end of the relevant AY, then you are supposed to pay 25% of the aggregate of tax and interest payable. If it is filed up to two years (after the expiry of 12 months & before the completion of 24 months), then you must pay 50% of the aggregate of tax and interest payable as a penalty.
What is the benefit of filing ITR-U?
- You get an additional 24 months to file an ITR even after the due date for belated ITR and revised ITR have lapsed.
- You can report any missed-out income and pay tax on it, reducing the chances of future tax notices and litigations.
Here’s a detailed guide on ITR-U : Updated Income Tax Return