What is an Updated Income Tax Return?

The Buyt Desk 

The income tax department has a provision for updating the income tax returns that are already filed. Through Form ITR-U the ‘Updated’ income tax return can be filed.

In the Union Budget 2022, the concept of updated return in income tax was introduced by the government. And the same is notified by the income tax department of India and Form ITR-U can be used for filing the ‘Updated’ income tax return (ITR).

What is Updated ITR?

A taxpayer can update his/ her ITR within 2 years of filing. The update can be payment of additional taxes, in case of errors or omissions. Under Section 139(8A) of the Income Tax Act, the updated return can be filed for the assessment year (AY) but within 24 months from the last day of the respective AY. The new income tax rules state the form where the updated returns can be filed and the steps for verification.

Who can file an Updated ITR?

Via ITR-U update returns can be filed by a taxpayer who has furnished/not furnished an original return, revised return or belated return, in case of any wrong statement or omission. As per the newly inserted provisions in the Income Tax Act, one can update returns for FY 2019-20 and subsequent assessment years. But only one updated return can be filed for each assessment year.

Who cannot file the updated return?

Below are the cases that cannot file the ITR-U –

• Taxpayer, against whom search or survey or prosecution proceedings are initiated for that assessment year

• When assessment/reassessment/revision/re-computation is pending or completed for that AY

• When there is no additional tax outgo

• When the total tax liability is to be reduced, losses to be adjusted against the income, there is a refund or increase in the refund amount

When can ITR-U be filed?

This provision is available from April 1st, 2022. Anytime for 24 months from the end of the respective AY IT-U can be filed. Currently, ITR-U can be filed only for AY 2020-21, AY 2021-22 and AY 2022-23.

Is interest levied on ITR-U tax payment?

According to a new provision in IT law, taxpayers have to pay interest of 25% on the tax due when ITR-U is filed within 12 months and interest of 50% when filed after 12 months but within the valid period. Along with tax due, additional interest should be paid when filing ITR-U.

What details are needed for ITR-U?

In the ITR-U form, the amount of additional income should be specified, under the correct income heads, on which tax is applicable. Detailed income break-ups need not be specified, unlike regular ITR forms. Along with details like name, permanent account number (PAN), tax years, and additional income reported, the taxpayer needs to specify the reason for filing the ITR-U. The reason can be one of the below –

• return previously not filed

• income not reported correctly

• wrong head of income chosen

• incorrect rate of tax

• reduction of carried forward losses

• reduction of unabsorbed depreciation

• reduction of Minimum Alternate Tax (MAT) credit/ Alternative Minimum Tax (AMT) credit

If one of the last 3 options is selected, then the tax year should be specified which will be affected because of this update and also should specify if any updated or revised return filing is needed for such affected tax years. An updated version of the applicable ITR form (ITR 1 – 7) should be furnished along with ITR-U.

How is the tax payable for an updated return calculated?

Section 140B describes the net tax liability for an updated return as follows –

How to verify the ITR-U?

The ITR-U verification option by posting the acknowledgement to Bangalore is not specified but only through a Digital Signature Certificate (DSC) in tax audit cases and filing of returns by a political party. The ITR-U verification by an alternate option of the Electronic Verification Code (EVC) is allowed for non-tax audit cases.