All about Updated Income Tax Return

All about Updated Income Tax Return

A new provision of updated tax returns has been lately introduced by our FM in the latest budget speech. Since then it has been creating a lot of buzz in the market about how it could be used to strengthen our financial records or clear the stain from our financial track records. And along with this buzz wagon, there has arisen a lot of confusion too among the taxpayers about its usage and limitations. So to clear this smoke of uncertainty we would like to briefly explain the updated income tax return and how it works.

What is an Updated Income Tax return?

An updated income tax return is a concept introduced for the taxpayer who missed filing their return or missed showing their income in their filed return but now wants to update their filing status (i.e.., they want to file their return or want to reflect their missing income).

Till what time period are we allowed to file the Updated Income Tax return?

A taxpayer can now file his updated tax return within two years from the end of the relevant assessment year (or 3 years from the tax period). i.e.., a taxpayer whose tax period is FY 2021-22, can now file his updated return until 31st March 2025.

How many times can I file an updated return for a relevant tax period?

A taxpayer can furnish his updated return only once for a relevant tax period.

Can everyone file an updated return or is there any kind of restriction?

An updated return cannot be filed, if it

a) Is a return of loss or
b) Leads to a reduction of the tax liability determined as per the previously filed return or
c) Results in a refund or increases the refund determined as per the previously filed return.

Also, a person is not eligible to file an updated return for the relevant tax period and any year preceding that, if in the relevant tax period

a) A search or survey has been initiated/ conducted against him by the tax department or
b) Books of accounts/other documents/ any assets are requisitioned by the department or
c) A notice has been issued by the department to the effect that any asset seized or requisitioned in the case of any other person, belongs to him or
d) A notice has been issued by the department to the effect that any books of account or documents, seized or requisitioned in the case of any other person, pertains/relates to him

Also, an updated return cannot be filed for the year in respect of which

a) Any assessment, reassessment, re-computation or revision of income is pending or has been completed
b) Prosecution proceedings have been initiated
c) the assessing officer has any information about the assessee, under double taxation avoidance agreements or under the following Acts, which has already been communicated to him, prior to the filing of such return –

i. the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
ii. the Prohibition of Benami Property Transactions Act, 1988
iii. the Prevention of Money-laundering Act, 2002
iv. the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

Is there any case where the filing of an updated return is mandatory?

A person who has originally filed a return of loss for any previous year, duly within the time allowed for filing the original return shall be allowed to furnish an updated return if the updated return is a return of income, irrespective of the time limit of two years from the end of the relevant assessment year.

However, in such cases, the assessee will have to furnish an updated return for each subsequent previous year too if a) such loss or unabsorbed depreciation has been carried forward or b) benefit of tax credit in respect of tax paid (due to various provisions) is to be reduced as a consequence of filing the updated return.

Is there any condition w.r.t tax which I need to care of while filing an updated return?

In case of an updated return, the assessee is required to pay an “additional income-tax” over and above the tax and interest computed to be payable.

This additional income-tax payable in case of an updated return shall be equal to:

  1. 25% of the aggregate tax and interest payable, if the updated return is furnished after the expiry of time available for filing a belated return or the revised return but before the completion of twelve months from the end of the relevant assessment year.
  • 50% of the aggregate tax and interest payable, if the updated return is furnished after the expiry of twelve months but before the completion of twenty-four months from the end of the relevant assessment year.