Did you forget to add your rental income in the income tax return? Or, did you not share the capital gain statement before filing the tax return? If that is the case, you don’t need to fret since you can avail the facility of updated return.
The Budget 2022 announcement made by Finance Minister Nirmala Sitharaman on February 1 allows you an updated return facility where you can pay a portion of the tax on the income omitted from the tax return filed earlier.
As per this facility, one can file an updated return within two years from the end of the year. The key aim of this facility is to correct any mistake or omission made unwittingly.
Is this all-hunky dory?
The FM pointed out that the department of income tax, instead of trying to recover the tax, can repose trust in the tax payers and expect them to rectify the mistakes they made while filing their returns.
But remember, if some search is carried out by the Income Tax department and a part of undisclosed income is found, then this facility of updated return cannot be availed. Also, the individual wouldn’t be allowed to adjust income furnished during the search under the updated return.
It is important to note that when income tax return for any year is pending for assessment or re-computation or revision of income by the income-tax department, it will not be eligible for revision.
The individual will be made to cough up an additional tax which could be 25 percent or 50 percent on the tax and interest on the additional income.
Aside from this, taxpayers will not be able to use this facility if the updated return ensues a lower total tax liability or income tax refund.
Experts also say that the facility cannot be used by those who are under scrutiny by the tax authorities.
So, it is fair to believe that an inadvertent mistake can be rectified in an updated return but when the underreporting was done deliberately — the taxpayer should be ready to face the heat!