Updated income tax return (ITR-U) – Latest Updates

The income tax department has notified Form ITR-U for filing the ‘Updated’ income tax return. The government introduced the concept of updated return in income tax in the Union Budget 2022. 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. 

The provision of updated return is available in Section 139(8A) of the Income Tax Act. The taxpayer can file the updated return after the relevant assessment year but within 24 months. The government has released a notification to amend the income tax rules. The new income tax rules specify the form in which updated returns need to be filed and the manner of their verification. 

Who can file an updated ITR?

Any person eligible to update returns for FY 2019-20 and subsequent assessment years as per the relevant provisions of the IT Act can file the updated return via Form ITR-U. A taxpayer would be able to file only one updated return for each assessment year.

Additional tax payment

The Act requires that the taxpayer has to pay an additional 25 per cent interest on the tax due if the updated ITR is filed within 12 months, while interest will go up to 50 per cent if it is filed after 12 months but before 24 months from the end of relevant Assessment Year. Hence, taxpayers looking to update their returns for FY 2019-20 will need to pay the tax due and interest along with an additional 50 per cent of such tax and interest. For those looking to file an updated return for FY 2020-21, the additional amount will be 25 per cent of the tax payable and interest. 

What details are required to be mentioned in ITR-U?

In ITR-U, the taxpayer needs to specify only the amount of additional income, under the prescribed income heads, on which tax is required to be paid. No detailed income break-up must be submitted, as in the case of filing regular ITR forms. The taxpayer must also specify the exact reason for filing the updated return in ITR-U. Further, it is required to mention the challan details for the additional tax paid for the updated return. 

How to verify the updated return?

ITR-U can be verified only through a Digital Signature Certificate (DSC) in tax audit cases and filing of return by a political party, whereas an alternative option, Electronic Verification Code (EVC), is given for the non-tax audit cases. However, the verification option by posting the acknowledgement to Bangalore has not been specified.

Who cannot file the updated return?

If search or survey or prosecution proceedings are initiated against the taxpayers for the relevant assessment year, they cannot file the updated return. Moreover, the taxpayer cannot file an updated return even if assessment/reassessment/revision/re-computation is pending or completed for the relevant assessment year. 

Also, the Act does not allow the taxpayer to file the updated return if there is no additional tax outgo. Hence, if 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, the taxpayers cannot file.