Taxpayers now have more time to file updated income tax returns (ITR-U) under the new provisions introduced in Budget 2025. The government has extended the time limit for filing updated returns from 24 months to 48 months, allowing taxpayers to correct errors or disclose missed income with additional tax.
The concept of Updated Income Tax Returns (ITR-U) was introduced in the Finance Act, 2022, enabling taxpayers to revise their returns if they:
✔ Missed filing their ITR before the deadline.
✔ Underreported their income in the original, belated, or revised return.
✔ Made errors in their previously filed returns.
By filing an updated return, taxpayers can avoid penalties and legal notices from the Income Tax Department. However, this comes with an additional tax liability.
A taxpayer can file an updated return (ITR-U) in the following cases:
✅ If they filed an original return under Section 139(1) but later discovered income underreporting.
✅ If they filed a belated return under Section 139(4) but later found missed income.
✅ If they filed a revised return under Section 139(5) and later realized income was still underreported.
✅ If they did not file any ITR at all and need to declare income.
🚫 If there is no additional tax liability (i.e., if filing the return would increase a refund or reduce tax liability).
🚫 If the Income Tax Department has initiated assessment proceedings for that assessment year.
🚫 If a show-cause notice under Section 148A was issued more than 36 months after the assessment year.
🚫 If the return is being filed to declare income from unexplained sources (e.g., benami transactions).
🚫 A taxpayer can file only one updated return per assessment year, and once filed, it cannot be revised.
🔹 Previous Rule: Taxpayers had 24 months from the end of the relevant assessment year to file an updated return.
🔹 New Rule: Taxpayers now get 48 months to file an updated return.
This gives taxpayers more flexibility to correct their tax filings. However, additional tax penalties apply.
Filing an updated return is not free—taxpayers must pay extra tax based on when they file:
🗓 Updated return filed within 12 months
➡ Additional Tax = 25% of (Regular Tax + Interest)
🗓 Updated return filed between 12-24 months
➡ Additional Tax = 50% of (Regular Tax + Interest)
🗓 Updated return filed between 24-36 months (New Budget 2025 Rule)
➡ Additional Tax = 60% of (Regular Tax + Interest)
🗓 Updated return filed between 36-48 months (New Budget 2025 Rule)
➡ Additional Tax = 70% of (Regular Tax + Interest)
🔴 Important: If an updated return is filed after 36 months, taxpayers must pay a 70% penalty on the additional tax and interest!
Taxpayers can file ITR-U through the Income Tax Portal (incometax.gov.in). The process is simple:
1️⃣ Login to the Income Tax e-filing portal.
2️⃣ Select the "ITR-U" (Updated Return) form.
3️⃣ Provide the reason for updating the return.
4️⃣ Calculate and pay additional tax.
5️⃣ Verify the return using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
✔ Yes, if you missed income disclosure, as it prevents future tax scrutiny.
✔ Yes, if you want to correct errors and avoid penalties.
❌ No, if you are expecting a refund, as updated returns cannot reduce tax liability.
To avoid mistakes and unnecessary penalties, consult a Chartered Accountant or Tax Expert before filing an updated return.
Filing an ITR on time is always the best approach, as it helps avoid unnecessary tax burdens and compliance issues.
For more tax updates, stay tuned! 📢
