The Concept of Updated Return was introduced through the Finance Act 2022, by inserting section 139(8A)
There are circumstances where an assessee fails to file the income tax returns within the due date u/s 139(1), time limit for filing Belated return u/ 139(4) has expired or the assessee has subsequently found that the income was under reported and the time limit to file the revised return u/s 139(5) as expired which then led to a lengthy process of litigation, interest and penalties on assessment of the returns.
The insertion of this section is an opportunity to the taxpayers to file the returns. The new provision allows the taxpayers to update their ITRs within two years of filing, on payment of additional taxes, in case of errors or omissions.
What is Updated Return?
Updated Return via FORM ITR-U offers a last opportunity to the assessee to voluntarily file the return of income to correct the mistakes/Omissions made earlier. The Scope of updated return is limited when compared to the scope of returns u/s 139(1)/139(4)/139(5).
When can updated return be filed?
The updated return can be filed within 24 months after the end of the relevant assessment year.
For Example:
- The Updated return cannot be filed for the assessment year 2019-20 as the period 24 months has already been expired.
- Whereas, for the assessment year 2020-21 the updated return can be filed within 31.03.2023.
- Likewise, the updated return for the assessment year 2021-22 can be filed before 31.03.2024.
Who cannot file the updated return?
- Where the return results in a loss, refund or increase the refund due or decrease the tax liability.
- If search or survey proceedings has already been initiated or any assessment or reassessment proceeding is pending or has been completed.
- If any criminal prosecution under the income tax law has been initiated against the assessee for the relevant assessment year or any information has been received under specified acts* or under information exchange agreements with foreign countries.
- The CBDT is also empowered to notify any person or class of persons, who will not be eligible to file an updated return.
Note:
Specified Acts
– Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
-The Prohibition of Benami Property Transactions Act, 1988
-The Prevention of Money-laundering Act, 2002;
-The Black Money (Undisclosed Foreign Income and Assets) and
-Imposition of Tax Act, 2015.
What is the additional Tax Payable in case of Updated Return?
Section 140B has also been inserted for the purpose of provision for tax on updated return.
Case 1: Where no return of income under section (1) or sub section (4) of section 139 has been filed by the assessee and tax is payable on the basis updated return.
Case 2: Where the return of income under section 139(1)/(4) or (5) has been furnished by the assessee, the tax payable on the basis of updated return,
The amount of tax payable on filing of Updated Return shall include
- amount of tax payable on the total income as per the slab rates,
- additional tax computed as mentioned below,
- Surcharge, Cess, Interest and late fees.
How to compute additional tax Payable?
- If the return is filed within 12 months from the end of the assessment year, the rate of additional tax payable shall be 25% (of regular tax + Interest).
- If the return is filed after 12 months but before 24 months from the end of the assessment year, the rate of additional tax payable shall be 50% (of regular tax + Interest).
The Final tax payable shall be computed after taking into account;
- the amount of advance tax paid,
- any TDS or TCS credit,
- any relief of tax claimed under section 89,
- any foreign tax credit relief under section 90/90a or 91
- any tax credit claimed to be set off in accordance with the provisions of section 115JJA or section 115JD.
the assessee shall be liable to pay such tax together with interest and fee payable as per the provisions of the Income Tax Act.
Explanation.—For the purposes of this section,—
- interest payable under section 234A, for the purposes of sub-section (1), shall be computed on the amount of tax on the total income as declared in the return, under sub-section (8A) of section 139, in accordance with the provisions of sub-section (1A) of section 140A;
- interest payable under section 234C, for the purposes of sub-section (2), shall be computed after taking into account the total income furnished in the return under sub-section (8A) of section 139 as the returned income;
- interest payable on the income as per return furnished under sub-section (8A) of section 139, shall be as per the provisions of income tax act as reduced by interest paid, in accordance with the earlier return, if any
Author
Swarna Sri K J
