In the latest Budget announcement, the government has allowed to file updated returns for the taxpayers on payment of additional taxes. The taxpayers can now fix any mistakes or omissions in their income tax return (ITR) via this ‘updated’ return within two years of the relevant assessment year’s closure.
These two years would commence from the end of the assessment year in which the tax should have been paid. Let us suppose you filed your return on December 31, 2021, then the assessment year would come to an end on March 31, 2022. In this case, you can file the updated return until March 31, 2024.
Additional tax outgo
Although the budget announcement of updated tax return cheered the tax payers and the markets but upon reading the fine print, it was clear that filing the updated return came at an extra cost of up to 50 percent of tax and interest.
Apart from the tax due on the additional income reported in the updated return, the taxpayer must pay an additional tax. This additional amount will be equivalent of 25 percent of the tax and interest amount payable in case the updated return is filed within one year of the relevant assessment year’s end.
By when can you file your updated tax return?
|Assessment year (AY)
|AY ends on
|March 31, 2022
|Can file updated tax return until
|March 31, 2024
Additional tax liability
|Additional Tax liability
|Before March 31, 2023
|25% of tax & interest
|Apr 1, 2023 - Mar 31, 2024
|50% of tax & interest
At the same time, if the taxpayer files an updated return after one year but before 24 months of the end of the assessment year, the additional tax liability will be equivalent to 50 percent of tax and interest amount due. The additional tax would also include cess and surcharge on the base tax.
However, if the taxpayer files a revised return, there is no need to pay any penalty. The government will soon elaborate on the way and format in which one can file this updated return.