Clarification regarding advance tax while filing Updated Return – Budget 2023
The Finance Act, 2022 inserted sub-section (8A) in section 139 of the Act enabling the furnishing of an updated return by taxpayers up to two years from the end of the relevant assessment year subject to fulfilment of certain conditions as well as payment of additional tax. For the determination of the amount of additional tax on such updated return section 140B was inserted in the Act.
2. The sub-section (4) of the section 140B of the Act provides for the computation of interest under section 234B of the Act on the tax on updated return. The said sub-section (4) provides that interest payable under section 234B of the Act shall be computed on an amount equal to the assessed tax or the amount by which the advance tax paid falls short of the assessed tax. This implied that interest was payable only on the difference of the assessed tax and advance tax. Further, the sub-clause (i) of the clause (a) of the said subsection also provides advance tax which has been claimed in earlier return of income shall be taken into account for computing the amount on which the interest was to be paid.
3. Therefore, in order to clarify the provisions of the sub-section (4) of section 140B of the Act, an amendment has been proposed in the said sub-section that interest payable under section 234B shall be computed on an amount equal to the assessed tax as reduced by the amount of advance tax, the credit for which has been claimed in the earlier return, if any.
4. This amendment will take effect retrospectively from the 1st day of April, 2022.
[Clause 67]
Extract of relevant clause of Finance Bill 2023
Clause 67 of the Bill seeks to amend the section 140B of the Income-tax Act relating to tax on updated return.
Sub-section (4) of the said section provides that interest payable under section 234B shall be computed on an amount equal to the assessed tax or the amount by which the advance tax paid falls short of the assessed tax. Further, sub-clause (i) of clause (a) of the said sub-section provides for reduction of advance tax which has been claimed in earlier return of income.
It is proposed to amend the said sub-section to provide that interest payable under section 234B shall be computed on an amount equal to the assessed tax as reduced by the amount of advance tax, the credit for which has been claimed in the earlier return, if any.
These amendments will take effect retrospectively from 1st April, 2022.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
67. Amendment of section 140B.
In section 140B of the Income-tax Act, in sub-section (4), with effect from the 1st day of April, 2022,–
(i) in the opening portion, the words “or, as the case may be, on the amount by which the advance tax paid falls short of the assessed tax,” shall be omitted and shall be deemed to have been omitted;
(ii) in clause (a), in sub-clause (i), after the words “earlier return”, the words “, if any” shall be inserted and shall be deemed to have been inserted.
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