If you somehow failed to file the correct return in the past two years, you can now do the same. The new rule came into force from this year onwards following the Finance Minister’s announcement during the Budget 2022-23.
Different categories of income tax payers can now file updated returns for the assessment year 2020-21 and 2021-22 by paying additional tax. But tax payers must note that this facility is not available for those who are seeking a refund.
But tax payers must ensure that the updated return can be filed within a span of two years from the end of the relevant assessment year i.e., March 2023 for assessment year 2020-21.
“Some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an updated return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” Finance Minister Nirmala Sitharaman had announced during the Budget speech on Feb 1, 2022.
When updated returns not permitted
However, tax payers are prevented from filing an updated return in few instances, for instance, when there is no additional tax outgo or if there is a refund or increase in the refund amount.
“The Tax Dep is biased as it allows filing of ITRs of past years only in case of Tax liability & not in case of refund or filing for compliance, which many taxpayers require as income proof, etc,” said CA Chirag Chauhan.
“Taxpayers cannot file returns in cases of no additional tax outgo, a refund or increase in the refund amount, search or survey or prosecution proceedings are initiated and assessment/reassessment/revision/re-computation is pending,” he adds.
However, the option of filing of updated returns is seen as a great incentive for those who missed reporting additional income such as income accrued in abroad.
“This is an excellent opportunity for taxpayers who have either missed filing their ITR, missed reporting additional income, or missed reporting foreign income and assets (applicable for Resident and Ordinarily Resident Cases), to be compliant before the Income-tax authorities. By filing an ITR U, one not only remains compliant, but it also reduces the risk of a notice or an audit query in the future, besides avoiding penal provisions under the Income-tax laws and notices under the Black Money Act,” Sudhakar Sethuraman, Partner with Deloitte India was quoted as saying.