Updated Income Tax Return (ITR-U). What, When and Why?

Introduction

Updated Income Tax Return is a new provision in the Income Tax Act introduced in the Union Budget 2022. A taxpayer can file an updated return u/s 139(8A) whether they have furnished or not furnished an original return, revised return, or belated return in case of any omission, error, or wrong statement in their earlier return of income. It can be filed within two years from the end of the relevant assessment year. Two years will be calculated from the end of the year in which the original return was filed/supposed to be filed. ITR-U was introduced to optimize tax compliance by taxpayers without attracting legal actions against non-filing of Income Tax Return.

Updated Income Tax Return (ITR-U): Who can file ITR-U?

Any person can file an updated income tax return in the following cases:

• Missed out return filing deadline and the belated return deadline.
• Income tax return was filed but:

1. Income is not reported as per the provisions of income tax.
2. Wrong head of income chosen.
3. Wrong rate of tax used.
4.  Reduction of the carried forward loss.
5. Reduction of unabsorbed depreciation.
6. Reduction of tax credit u/s 115JB/115JC.

It is to be noted that a person can file only one updated return for each assessment year.

When an updated return cannot be filed?

• An updated return cannot be filed if it reflects total income as a loss.
• When the updated return results in lower tax liability.
• For claiming/enhancing the refund amount.
• Search proceeding u/s 132 has been initiated against the assessee.
• If a survey is conducted against the assessee under section 133A.
• Books, documents, or assets are seized or called for by the Income Tax authorities u/s 132A.
• If assessment or reassessment or re-computation or revision is pending or has been completed.
• If prosecution proceedings have been initiated against the person for the relevant assessment year.
• If the Assessing Officer (AO) has information in respect of him for that year under the Specified Act, and the same has been communicated to him before the filing of the updated return.
• If any information is received under (DTAA) or (TIEA) in respect of a person for the relevant assessment year.
• In other notified cases by the CBDT. 

Time limit for filing updated return.

The time limit to file an updated return u/s 139(8A) is 24 months from the end of the relevant assessment year. The updated return for FY 2020-2021 (AY 2021-2022) can be filed till 31st March 2024.

Additional tax when filing ITR-U

• ITR-U filed within 12 months from the end of the relevant AY: 25% of additional tax + interest + late filing fee.
• ITR-U filed within 24 months from the end of the relevant AY: 50% of additional tax + interest + late filing fee.
• It is to be noted that no penalty is levied on ITR-U.

 Verification of ITR-U

ITR-U can be verified in the following manner:

• In cases tax audit is not applicable: Electronic Verification Code, ie using Aadhar OTP, Internet Banking etc.
•  In case tax audit is applicable: Using Digital Signature of the Asessee or authorized representative of the assessee.

Unlike original or belated Income Tax Return, there will not be an option to verify later or physical verification by sending signed acknowledgements in the case of non-audit cases.

Benefit of ITR-U

Filing ITR-U could prevent income tax proceedings related to non-filing of income tax returns, such as best judgment assessments, penalties, surveys, and searches, etc.

Further, persons who are required to submit their Income Tax Return for purposes such as bank loan processing or visa applications, but have not yet filed their returns, can take advantage of ITR-U to fulfill such requirements and successfully file their income tax return.

Author: CA. Arun Chacko, JAKS & Associates