Income Tax: Want to update your ITR? You can file an updated tax return; Here’s all you need to know

The deadline to file income tax return expired on July 31, taxpayers can, meanwhile, file a belated income tax return (ITR) before December 31, 2024 after paying a penalty. It is noteworthy to mention that a record 7.28 crore tax returns were filed by July 31, 2024 with 72 percent of tax filers opting for the new tax regime. Read this Livemint article for more details.

While some are awaiting their income tax refund others – who have yet not filed their ITR – may be unaware that there is a provision to file an updated income tax return (ITR-U).

The time period given to file an updated return is two years from the end of relevant assessment year (AY). This means the taxpayers could file an updated return for FY 2020-21 up to March 31, 2024. For the FY 2021-22, an updated income tax return (ITR) can be filed up to March 31, 2025.

“For FY23-24 we can file ITR-U after December 31, 2024. The last date to file ITR-U for FY23-24 is March 31, 2027,” says chartered accountant Pratibha Goyal, partner, PD Gupta & Company, a Delhi-based firm.

Let us understand more on the provisions of ITR-U.

What is ITR-U?

The provision of income tax return (updated) was inserted in Budget 2022 that allows taxpayers to update/ file the income tax return (ITR) on payment of additional taxes in case of errors or omissions.

An income tax return (updated) is filed under section 139(8) read with section 140B of the Income Tax Act, 1961.

The aim of ITR-U was to provide an opportunity for voluntary compliance in order to rectify errors and omissions and to reduce litigation.

When can you file an updated return?

These are some of the common scenarios when you can file an updated return:

A. When the return was not filed

or when the return was filed:

A. income was not reported correctly

B. Wrong heads of income was chosen

C. To reduce carried forward loss

D. To reduce unabsorbed depreciation

E. To reduce tax credit under section 115JB/ 115JC

F. Rate of tax was not correct.

When can you not file an ITR-U?

A. When there is a ‘nil’ return or a return of loss.

B. When there is an effect of decreasing the total tax liability determined on the basis of return furnished for the relevant AY.

C. When the return results in refund or increases the refund due on the basis of return furnished for the relevant AY and

D. Also, taxpayer is not allowed to file an updated return (ITR-U) in case of search and seizure orin case where any prosecution proceedings have been initiated.

Can you file an updated return under a different tax regime?

The choice of tax regime can be made only till the due date prescribed under 139(1) of the Income Tax (I-T) Act. And once chosen till July 31, taxpayer can't change the regime after the due date.

How many times you can file an updated ITR?

As per the provisions of section 139(8A), taxpayers cannot file income tax return (updated) more than once.

Can I file an ITR-U if there is no tax payable?

No, if total tax is adjusted with TDS credit and there is no tax liability, then you can’t file an updated ITR.

How much extra tax do I have to pay when I file an ITR-U?

Taxpayer has to pay an additional 25 percent of aggregate tax and interest due if the updated ITR is filed within 12 months. The taxpayer has to pay an additional 50 percent of aggregate tax and interest due if it filed after 12 months but before 24 months from the end of the relevant assessment year.