The Finance Bill, 2026 proposes to permit filing of an updated return even after issuance of a reassessment notice, to promote voluntary compliance and reduce litigation. Under the existing framework of the Income-Tax Act, 2025, an updated return cannot be filed once assessment or reassessment proceedings are pending or completed. This restriction barred taxpayers from correcting income after a notice of reassessment was issued. The proposed amendment allows a taxpayer to furnish an updated return for the relevant tax year in pursuance of a reassessment notice issued under section 280, within the time specified in such notice. Once this option is exercised, the taxpayer will be barred from filing any other return in response to the notice. To balance this relaxation, an additional 10% income-tax is proposed over and above the existing additional tax payable on updated returns. Where such additional tax is paid, the income so disclosed will not be used as a basis for penalty. Similar amendments are proposed in the Income-tax Act, 1961, with effect from April 1, 2026.
Allowing the filing of updated return after issuance of notice of reassessment:
Section 263 of the Income Tax Act, 2025 (“the Act”) makes the provisions for filing of Income Tax Return by taxpayers. The said section deals with the comprehensive framework that lays down class of persons who are required to file a return, the due dates, and the different types of returns that may be furnished. It covers the original return, belated return, revised return and the updated return.
2. Further, section 263(6) of the Act deals with the updated return of Income. It allows a taxpayer, regardless of whether the original return is filed, to file an updated return within 48 months from the end of the financial year succeeding the relevant tax year. This provision is meant to promote voluntary compliance on the part of taxpayer to offer the income for taxation. The said section further imposes certain restrictions on updating the return of Income. i.e. updated return cannot be a return of loss, cannot reduce tax liability, and cannot increase a refund. Filing an updated return requires payment of additional income-tax, as prescribed, and it is not permitted in cases where assessment, reassessment, search, survey, or prosecution proceedings are pending or completed.
3. Furthermore, Section 263(6)(c)(v) of the Act prohibits the filing of updated return in such cases where any proceedings for assessment or reassessment or recomputation or revision of income is pending or has been completed for the said tax year. Accordingly, filing of update return was not allowed in such cases where proceedings of reassessment has been initiated.
4. Section 267(5) of the Act provides that additional income-tax amounting to 25%, 50%, 60% and 70% of the aggregate of tax and interest payable, shall be paid alongwith original tax and interest payable, for filing the updated return in first, second, third and fourth year, respectively from the end of the financial year succeeding the relevant tax year.
5. In this regard, it is considered that updated return may also be allowed in such cases where proceedings of reassessment have been initiated and notice of reassessment has been issued under section 280 of the Act as the same would reduce litigation.
6. In this regard, it is proposed to amend section 263 of the Act, so that an updated return may be furnished by a person for the relevant tax year in pursuance of a notice under section 280 within such period as specified in the said notice and in such a case assessee shall be precluded from filing return of income in pursuance of notice under section 280 in any other manner.
7. It is further proposed to amend the section 267 of the Act so as to prescribe that where an updated return is filed in pursuance of a notice issued under section 280 within the period specified in the said notice, the additional income-tax payable shall be increased by a further sum of 10 % of the aggregate of tax and interest payable on account of furnishing the updated return. It is further proposed that where additional income-tax is paid as per proposed additional income-tax, the income on which such additional income-tax is paid shall not form the basis of imposition of penalty under section 439.
8. It is proposed that the above amendments shall come into force from the 1st day of April, 2026 and shall be applicable for the tax year 2026-27 and subsequent tax years.
9. It is also proposed that similar amendment shall be made in the Income-tax Act, 1961 to align with the proposed amendments in the Income-tax Act, 2025. This amendment in the Income-tax Act, 1961 is made so that an updated return may be furnished by a person for the relevant assessment year in pursuance of a notice under section 148 within such period as specified in the said notice, and in such a case assessee shall be precluded from filing return of income in pursuance of notice under section 180 in any other manner.
10. It is further proposed that amendment in the Income-tax Act, 1961 shall come into force retrospectively from 1st day of March, 2026.
[Clause 5, 57]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 5 of the Bill seeks to amend section 139 of the Income-tax Act, 1961 relating to return of income.
Explanation 2 to sub-section (1) of said section provides definition for “due date” to mean the last date for filing the return by different classes of assessee or person for the assessment year, with different conditions applied therein.
It is proposed to substitute the said Explanation so as to provide that for the purposes of this sub-section “due date” means in respect of the persons mentioned in column B of the Table below, subject to the conditions as mentioned in column C of the said Table, shall be the due date of assessment year as mentioned in column D thereof:
TABLE
| Sl. No. | Person | Conditions | Due date |
| A | B | C | D |
| 1. | Assessee, including the partners of the firm or the spouse of such partner (if section 5A applies to such spouse). | Where the provisions of section 92E apply. | 30th November. |
| 2. | (i) Company; (ii) Assessee (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; (iii) partner of a firm whose accounts are required to be audited under this Act or under any other law in force or the spouse of such partner (if section 5A applies to such spouse). |
Where the provisions of section 92E do not apply. | 31st October. |
| 3. | (i) Assessee having income from profits and gains of business or profession whose accounts are not required to be audited under this Act or under any other law for the time being in force; (ii) partner of a firm whose accounts are not required to be audited under this Act or under any other law in force or the spouse of such partner (if section 5A applies to such spouse). |
Where the provisions of section 92E do not apply. | 31st August. |
| 4. | Any other assessee. | — | 31st July. |
Sub-section (5) of the said section of the said Act deal with the revised return of income. It allows a person who has already furnished a return under sub-sections (1) and (4) of the said section to file a revised return, if any omission or wrong statement is discovered in the original or belated return. Such revised return must be furnished at any time before three months prior to the end of relevant assessment year or before completion of assessment, whichever is earlier.
It is further proposed to substitute said sub-section to provide that if any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may, subject to the provisions of section 234-I, furnish a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
Sub-section (8A) of the said section provides for updated return of Income. It allows a taxpayer, whether or not a return was furnished earlier, to file an updated return within forty-eight months from the end of the financial year succeeding the relevant tax year. This provision is meant to promote voluntary compliance on the part of taxpayer to offer the income for taxation.
It is proposed to provide for filing updated return for reducing the loss in specified circumstances. Also, an updated return may be furnished by a person for the relevant assessment year in pursuance of a notice under section 148 within such period as specified in the said notice and in such a case, the assessee shall be precluded from filing return in pursuance of the said notice in any other manner.
These amendments will take effect retrospectively from 1st March, 2026.
Clause 57 of the Bill seeks to amend section 263 of the Income-tax Act, 2025 relating to return of income.
Clause (c) of sub-section (1) of said section defines the expression “due date” as the date of the financial year succeeding the relevant tax year for filing the return of income by different classes of assessee or person with different conditions applied therein.
It is proposed to substitute said clause (c) for the purposes of this section “due date” in respect of the persons mentioned column B of the Table below, subject to the conditions mentioned in column C of the said Table, shall be the due date of the financial year succeeding the relevant tax year as mentioned in column D thereof:
| Sl. No. | Person | Conditions | Due date |
| A | B | C | D |
| 1. | Assessee, including the partners of the firm or the spouse of such partner (if section 10 applies to such spouse). | Where the provisions of section 172 apply. | 30th November. |
| 2. | (i) Company; (ii) Assessee (other than a company) whose accounts are required to be audited under this Act or under any other law in force; (iii) partner of a firm whose accounts are required to be audited under this Act or under any other law in force; or the spouse of such partner (if section 10 applies to such spouse). |
Where the provisions of section 172 do not apply. | 31st October. |
| 3. | (i) Assessee having income from profits and gains of business or profession whose accounts are not required to be audited under this Act or under any other law in force; (ii) partner of a firm whose accounts are not required to be audited under this Act or under any other law in force or the spouse of such partner (if section 10 applies to such spouse). |
Where the provisions of section 172 do not apply. | 31st August. |
| 4. | Any other assessee. | — | 31st July. |
Sub-section (5) of the said section deals with the revised return of income. It allows a person who has already furnished a return under section 263(1) and (4) to file a revised return, if any omission or wrong statement is discovered in the original or belated return. Such revised return required to be furnished within nine months from the end of the relevant tax year or before completion of assessment, whichever is earlier.
It is further proposed to amend the said section so as to increase the prescribed time limit for filing the revised return from its existing time limit of nine months to twelve months from the end of the relevant tax year.
The said section provides for comprehensive framework that lays down the class of persons who are required to file a return, the due dates, and the different types of returns that may be furnished. It covers the original return, belated return, revised return and updated return.
Sub-section (6) of the said section provides for the updated return of income. It allows a taxpayer, whether or not a return was furnished earlier, to file an updated return within forty-eight months from the end of the financial year succeeding the relevant tax year. This provision promotes voluntary compliance on the part of taxpayer to offer the income for taxation.
Sub-clause (v) of clause (c) of the said sub-section prohibits filing of updated return in such cases where any proceedings for assessment or reassessment or recomputation or revision of income is pending or has been completed for the said tax year.
It is proposed to amend the said sub-section so that an updated return may be furnished by a person for the relevant tax year in pursuance of a notice issued under section 280 within such period as specified in the said notice and in such a case, the assessee shall be precluded from filing of return in pursuance of the said notice in any other manner.
It is also proposed to provide the filing of updated return for reducing the loss in specified circumstances.
It is also proposed to amend clause (e) of sub-section (6) of the said section so as to give the reference of “206(3) and (4)” instead of “206(l)(m) to (p)”.
These amendments will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
5. Amendment of section 139.
In section 139 of the Income-tax Act, with effect from the 1st day of March, 2026,––
(a) in sub-section (1), for Explanation 2, the following Explanation shall be substituted and shall be deemed to have been substituted, namely:––
‘Explanation 2.––For the purposes of this sub-section, “due date” in respect of the persons mentioned in column B of the Table below, subject to the conditions as mentioned in column C of the said Table, shall be the due date of assessment year as mentioned in column D thereof:
TABLE
| Sl. No. | Person | Conditions | Due date |
| (A) | (B) | (C) | (D) |
| 1. | Assessee, including the partners of the firm or the spouse of such partner (if section 5A applies to such spouse). | Where the provisions of section 92E apply. | 30th November. |
| 2. | (i) Company;
(ii) Assessee (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; (iii) partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force or the spouse of such partner (if section 5A applies to such spouse). |
Where the provisions of section 92E do not apply. | 31st October. |
| 3. | (i) Assessee having income from profits and gains of business or profession whose accounts are not required to be audited under this Act or under any other law for the time being in force;
(ii) partner of a firm whose accounts are not required to be audited under this Act or under any other law for the time being in force or the spouse of such partner (if section 5A applies to such spouse). |
Where the provisions of section 92E do not apply. | 31st August. |
| 4. | Any other assessee. | — | 31st July. |
(b) for sub-section (5), the following sub-section shall be substituted and shall be deemed to have been substituted, namely:––
“(5) If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may, subject to the provisions of section 234-I, furnish a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”;
(c) in sub-section (8A),––
(i) in the first proviso, in item (i), after the words “return of a loss”, the words “except in a case referred to in the sixth proviso” shall be inserted;
(ii) in the third proviso, in item (b), after the words “in his case”, the words “except in a case referred to in the eighth proviso” shall be inserted;
(iii) in the sixth proviso, after the words “return of income”, the words “or such updated return has the effect of reducing the loss” shall be inserted;
(iv) after the seventh proviso, the following proviso shall be inserted, namely:––
“Provided also that an updated return may be furnished by a person for the relevant assessment year in pursuance of a notice under section 148 within such period as specified in the said notice and in such a case, the assessee shall be precluded from filing return in pursuance of the said notice in any other manner.”.
57. Amendment of section 263.
In section 263 of the Income-tax Act,––
(a) in sub-section (1), for clause (c), the following clause shall be substituted, namely:––
‘(c) for the purposes of this section, “due date” in respect of the persons mentioned in column B of the Table below, subject to conditions as mentioned in column C of the said Table, shall be the due date of the financial year succeeding the relevant tax year as mentioned in column D thereof:
TABLE
| Sl. No. | Person | Conditions | Due date |
| (A) | (B) | (C) | (D) |
| 1. | Assessee, including the partners of the firm or the spouse of such partner (if section 10 applies to such spouse). | Where the provisions of section 172 apply. | 30th November. |
| 2. | (i) Company;
(ii) Assessee (other than a company) whose accounts are required to be audited under this Act or under any other law in force; (iii) partner of a firm whose accounts are required to be audited under this Act or under any other law in force; or the spouse of such partner (if section 10 applies to such spouse). |
Where the provisions of section 172 do not apply. | 31st October. |
| 3. | (i) Assessee having income from profits and gains of business or profession whose accounts are not required to be audited under this Act or under any other law in force;
(ii) partner of a firm whose accounts are not required to be audited under this Act or under any other law in force or the spouse of such partner (if section 10 applies to such spouse). |
Where the provisions of section 172 do not apply. | 31st August. |
| 4. | Any other assessee. | — | 31st July. |
(b) for sub-section (5), the following sub-section shall be substituted, namely:––
“(5) If any person, having furnished a return under sub-section (1) or (4), discovers any omission or any wrong statement therein, he may, subject to the provisions of section 428(b), furnish a revised return at any time within twelve months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier.”;
(c) in sub-section (6),––
(i) for clause (b), the following clause shall be substituted, namely:––
“(b) (i) the provisions of clause (a) shall continue to apply for a tax year if any person has sustained a loss in the said tax year and has furnished a return of loss within the due date specified under subsection (1) and the updated return is a return of income or such updated return has the effect of reducing the loss;
(ii) the provisions of clause (a) shall also apply where an updated return is furnished by a person for the relevant tax year in pursuance of a notice issued under section 280 within such period as specified in the said notice and in such a case, the assessee shall be precluded from filing return in pursuance of the said notice in any other manner;”;
(ii) in clause (c),––
(A) in sub-clause (i), after the words “tax year”, the words, brackets, figures and letter “except in a case referred to in sub-section (6) (b) (i)” shall be inserted;
(B) in sub-clause (v), after the words “tax year” the words, brackets, figures and letter “except in a case referred to in sub-section (6) (b) (ii)” shall be inserted;
(iii) in clause (e), for the figures, brackets, letters and words “206(1)(m) to (p) and 206(2)(e) to (h)”, the figures, brackets, letters and words “206(2)(e) to (h) and 206(3) and (4)” shall be substituted.
