The landscape of tax compliance received a significant update with the unveiling of the Updated Return provision in the Income Tax Act of 1961, through the Budget 2022. This transformative change, brought to life with the insertion of a new section 139(8A), came into effect from 1st April 2022.
Under Section 139(8A) of the Income Tax Act, taxpayers now have the ability to file Updated Return (ITR-U). This option is available to those individuals who either have not filed their return initially under sections 139(1) for Original, 139(4) for Belated, or 139(5) for Revised returns. The main goal behind this innovative addition is to encourage voluntary tax compliance while simultaneously reducing the burden of litigation for taxpayers.
Taxpayers looking to avail themselves of this new opportunity can do so by utilizing Form ITR-U. It is important to note that this option can be exercised only once for a particular tax year.
This progressive step by the Income Tax Act not only streamlines the process for taxpayers but also emphasizes the importance of staying updated with tax regulations. Embracing this new provision can lead to a smoother tax compliance journey while fostering a culture of voluntary tax responsibility.
Here are the all-important provisions about the Updated Return. Stay informed, stay compliant, and take advantage of the Updated Return provision under the Income Tax Act to ensure a hassle-free tax experience.
1. Who Can File Updated Return under Section 139(8A):
Under the newly introduced provision of Section 139(8A) of the Income Tax Act, all types of taxpayers, including Individuals, HUFs (Hindu Undivided Families), Firms/LLPs (Limited Liability Partnerships), Companies, AOPs (Association of Persons), BOIs (Body of Individuals), and more, are eligible to file Updated Returns.
To qualify for filing under Section 139(8A), taxpayers must meet two essential conditions:
(i) Non-filing or Errors/Omissions: The taxpayer should not have previously filed their income tax return, or if they have, there should be errors or omissions in the original return filed.
(ii) Disclosure of Additional Income: Additionally, the taxpayer must disclose any additional income sources that were missed in the earlier filed return. It is also required that the taxpayer pays any additional taxes resulting from this disclosure.
2. Who Cannot File Updated Return:
Under the provisions of Section 139(8A) of the Income Tax Act, there are certain scenarios where taxpayers, including Individuals, HUFs (Hindu Undivided Families), Firms/LLPs (Limited Liability Partnerships), Companies, AOPs (Association of Persons), BOIs (Body of Individuals), and others, are ineligible to file an Updated Return.
Here are the cases where filing an Updated Return is not permitted:
(i) Return of Loss: If the return pertains to a loss, it cannot be updated using this provision.
(ii) Reduction in Tax Liability or Increase in Refund: ITR-U cannot be filed if they result in decreasing the tax liability or increasing the refund amount.
(iii) Search Initiated under Section 132: When a search is initiated under Section 132 of the Income Tax Act or if books of accounts, documents, or assets are requisitioned under Section 132(A), ITR-U cannot be filed.
(iv) Survey Conducted under Section 133A: In cases where a Survey has been conducted under Section 133A (except for Section 133A(2A)), Updated Returns are not allowed.
(v)Ongoing or Completed Assessment: If any assessment is either under process or already completed, taxpayers are ineligible to file an Updated Return.
(vi)Information with Assessing Officer under Specified Act: If the Assessing Officer possesses information about the assessee under any specified act, Updated Returns cannot be filed.
(vii) Information Received under Section 90 or 90A: If information has been received by the taxpayer under Section 90 or 90A, and the same has been communicated before the date of furnishing the Updated Return, filing is not permitted.
(viii) Initiation of Prosecution Proceedings: In cases where prosecution proceedings have been initiated before the date of furnishing the Updated Return, taxpayers are ineligible to use this provision.
(ix)Class of Persons Notified by the Board: Lastly, if the taxpayer belongs to a specific class of persons as notified by the board, they cannot file an Updated Return.
It’s crucial for taxpayers to be aware of these conditions to ensure compliance with tax laws. By understanding these situations of ineligibility, taxpayers can make informed decisions regarding their tax filing process.
3. Deadline for Filing Updated Return:
Filing an Updated Return under Section 139(8A) of the Income Tax Act comes with a specific timeframe that taxpayers should be aware of this. Here’s the breakdown:
A taxpayer has the option to file an Updated Return for any Financial Year within the end of 2 years from the end of the related Assessment Year. This means that you have a window of two years after the end of the Assessment Year to submit your Updated Return.
To make it easier, here are the last dates for filing Updated Returns for recent Financial Years:
(i) Financial Year 2020-21: The deadline for filing an Updated Return is set for March 31, 2024.
(ii) Financial Year 2021-22: You have until March 31, 2025, to file your Updated Return for this financial year.
(iii) Financial Year 2022-23: For the latest financial year, the deadline to submit your Updated Return is March 31, 2026.
This timeframe offers taxpayers a reasonable window to review, update, and rectify any errors or omissions in their previously filed returns. It’s important to mark these dates on your calendar to ensure timely compliance with tax regulations.
4. Late Fees & Additional Tax Payable for filing Updated Returns:
When filing an ITR-U under Section 139(8A) of the Income Tax Act, taxpayers should be aware of the late fees and additional tax payable based on the delay in filing. Here’s a breakdown of the provisions under Section 140B:
(i) Additional Tax Payable:
If the Updated Return is filed within 12 months from the end of the respective Assessment Year (AY), the additional tax payable is 25% of the tax amount, which includes surcharge, cess, and interest.
If the Updated Return is filed after 12 months from the end of the respective Assessment Year, the additional tax payable increases to 50% of the tax amount, including surcharge, cess, and interest.
(ii) Late Fees for NIL Tax Returns:
It’s important to note that a NIL return cannot be filed using ITR-U. If the taxpayer’s tax liability is zero (NIL), they are still required to pay the applicable late filing fees.
For small taxpayers, the late filing fee is Rs. 1,000. For others, the late filing fee is Rs. 5,000, with this being the maximum amount.
5. Conclusion:
The inclusion of the Updated Return provision in the Income Tax system presents a valuable opportunity for taxpayers to correct any errors made in their previous filings. This new avenue not only allows for rectification but also eases the compliance burden for taxpayers. Additionally, the Updated Return, filed using Form ITR-U, serves as a useful income proof document for individuals.
Understanding the intricacies of this facility is crucial for taxpayers to fully leverage its benefits. However, as ITR-U filing is a relatively new concept in the tax structure, many taxpayers might find the process a bit challenging at first.
To navigate this effectively and ensure maximum advantage, it is highly recommended for taxpayers to seek assistance from a qualified tax consultant. These professionals are well-versed in the nuances of filing ITR-U and can provide valuable guidance tailored to individual situations.
To Access the process of ITR-U filing in the I-T portal CLICK HERE
To Know about Tax Benefits under section 80D of Income Tax CLICK HERE
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