New ITR rules: Relief that taxpayers got with 2 months window to revise forms

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The updated return does not replace the revised return, but the taxpayers would be able to update their returns within 24 months of the end of the assessment year if the conditions are satisfied.

Finance Minister, Nirmala Sitharaman, introduced her Fourth Budget 2022, where she announced that the taxpayers would be able to update any omissions or errors in their return by filing an ‘Updated’ return. So far, there are three versions of income tax returns – original return, revised return, and belated return.

The taxpayers need to file income tax returns within the due dates specified under the provisions (Section 139(1)) of the Income Tax Act, which is an original return. If the taxpayers missed the original return filing date, they have the option to file a belated return under Section 139(4) of the Act. Further, they can file a revised return under Section 139(5) of the Act to revise the details reported in the original or belated return. The due date of filing belated and revised returns is 31st December of the relevant assessment year or before the completion of the assessment, whichever date is earlier.

To provide relief to the taxpayers by providing more time for revision of returns for the reason of omission or errors, the government has introduced a new ‘Updated’ return.

Who can file an updated return?

Any person can file an updated return of income whether or not the taxpayer has previously filed the return. The taxpayer can furnish the updated return within 24 months of the end of the relevant assessment year.

The updated return does not replace the revised return, but the taxpayers would be able to update their returns within 24 months of the end of the assessment year if the following conditions are satisfied:-

  • If there is additional tax liability in the updated return, i.e. there is no reduction in the total tax liability as per original, revised or belated return; or
  • It does not result in a return of loss; or
  • There is no refund or increase in a refund in the updated return; or
  • No assessment/reassessment/revision/re-computation is pending or completed for the same AY; or
  • No search or survey is initiated against the taxpayer for the relevant assessment year or two preceding years; or
  • No prosecution proceedings are initiated against the taxpayer before the filing of an updated return; or
  • The income tax officer has not communicated any information available with him/her under specified laws or related to tax treaty agreements to the taxpayer before filing the updated return for the relevant assessment year.

Penalty on additional tax liability

If the taxpayer files the updated return after expiry of the due date of revised return and belated return, and before completion of 12 months from the end of the relevant assessment year, a penalty equivalent to 25% of the tax and interest amount is payable.

The taxpayer shall pay a penalty of 50% if the updated return is filed between 12 months and 24 months of the end of the relevant assessment year.

How is the updated return different from the revised return?

The taxpayer can update the changes through both revised and updated returns. However, there should be an additional tax liability to file an ‘Updated Return’, and all other conditions mentioned above must be satisfied.

Further, the taxpayer can file an updated return even if the original return is not filed, which is not possible in the case of a revised return. The taxpayer can file a revised return only if he/she files the original or belated return.

Moreover, the taxpayer has to pay a penalty of 25% or 50% of the tax and interest amount payable while filing the updated return. But while filing a revised return, there are no such penalties.

Conclusion

With this, the government has offered a chance to the taxpayers to fully declare their income and pay taxes if any unpaid due to errors or mistakes in the return. However, the penalties are quite harsh for the taxpayer. The new provision for filing the updated return is introduced as Section 139(8A) under the Income Tax Act. The government will specify the manner and format of filing the updated return.

By, Archit Gupta, Founder and CEO – Clear 

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