The Updated Income Tax Return (ITR-U) is a recent provision introduced under Section 139(8A) of the Income Tax Act, 1961. This provision gives taxpayers an opportunity to correct errors or omissions in their previously filed returns, even after the prescribed deadlines have passed. Whether it’s missed income, incorrect claims, or errors in reporting, the ITR-U form allows individuals to amend their returns and ensure they stay in compliance with the law. The introduction of this form, as part of the 2022 Union Budget and extended in the 2025 Budget, provides more time for taxpayers to file updated returns, ensuring that any mistakes are corrected and tax liabilities are properly reported.
What is ITR-U?
An Updated Income Tax Return (ITR-U) is a mechanism under Section 139(8A) of the Income Tax Act, introduced to allow taxpayers to rectify previously filed returns. It is designed for those who either missed filing their return or need to amend errors or omissions in their original, belated, or revised returns.
Unlike the belated return, which must be filed before a specific date (usually by December 31st of the assessment year), ITR-U can be filed after the due date, including after the belated return period has passed. This form is for situations where taxpayers realize that they missed reporting income, made incorrect claims, or even applied wrong tax rates.
Who is Eligible to File ITR-U?
To be eligible for filing ITR-U, the taxpayer must meet the following criteria:
- Failure to file a return within the original or belated deadline.
- Mistakes or omissions in a previously filed return (whether it was original, belated, or revised).
- You may need to file an ITR-U if you missed reporting income or made incorrect claims in your initial filing.
Common Scenarios Where ITR-U Can Be Filed
Here are some common situations where filing an ITR-U is appropriate:
- Missed filing your tax return for the relevant assessment year.
- Incorrect reporting of income or failure to report some income.
- Reporting income under the wrong head, leading to miscalculation of tax.*
- Applying incorrect tax rates or exemptions.
- Reporting losses or depreciation in a manner that affects carried forward losses or unabsorbed depreciation.
*In such cases, filing a rectification return under Section 154 can also be beneficial. It helps correct errors in the original return and may save you both tax and penalties. Moreover, it is a more convenient option for rectifying mistakes as compare to Belated return.
Restrictions on Who Cannot File ITR-U
While ITR-U offers a great deal of flexibility, certain restrictions apply. You cannot file ITR-U if:
- You’ve already filed an updated return for the same assessment year.
- The return would result in a loss, or a reduction of tax liability.
- The update increases refunds or hikes the refund amount.
- There is an ongoing tax investigation (Section 132 or Section 133A).
- Assessment or reassessment is pending or has been completed for the return in question.
ITR-U Filing Deadline
One of the major changes in the 2025 Union Budget is the extension of the deadline for filing an updated return. Previously, taxpayers had a 2-year window to file ITR-U. However, with the new update, the deadline has been extended to four years from the end of the relevant assessment year, giving taxpayers more time to rectify any errors.
The revised filing deadlines are:
- For AY 2022-23 (FY 2021-22), the last date to file ITR-U is 31st March 2027.
- For AY 2023-24 (FY 2022-23), the last date to file ITR-U is 31st March 2028.
- For AY 2024-25 (FY 2023-24), the last date to file ITR-U is 31st March 2029.
How to File ITR-U
Filing an ITR-U involves the following steps:
1. Download the ITR-U Form: The form is available on the official Income Tax e-filing portal.
2. Fill in the Information: Provide all necessary details regarding the corrections, such as missed income, incorrect claims, or other errors.
3. Calculate Additional Tax: If the updates result in higher tax liabilities, you need to pay the additional tax, interest, and penalty, if applicable.
4. Submit the Updated Return: After filling out the form and making the payment, submit your updated return to the Income Tax Department.
Penalties and Additional Tax for ITR-U
When filing ITR-U, the taxpayer is required to pay additional taxes, which are subject to specific penalties based on when the return is filed. The penalties for late filing are as follows:
- Within 12 months from the end of the relevant assessment year: 25% of the average tax and interest due.
- Within 24 months from the end of the relevant assessment year: 50% of the average tax and interest due.
- Within 36 months from the end of the relevant assessment year: 60% of the average tax and interest due.
- Within 48 months from the end of the relevant assessment year: 70% of the average tax and interest due.
Tax Calculation for ITR-U
When filing ITR-U, the tax liability will include:
- Tax payable on the additional income reported.
- Interest under Sections 234A, 234B, and 234C.
- Late filing fee under Section 234F.
- Additional tax or penalty, based on how late the return is filed.
Key Considerations Regarding ITR-U
1. Purpose: The primary objective of ITR-U is to provide taxpayers with an opportunity to correct errors, omissions, or incomplete reporting in their returns. This allows them to comply with tax laws and avoid legal complications.
2. One-Time Filing: A taxpayer can only file one ITR-U for a specific assessment year. Ensure that all the necessary corrections are made in a single filing.
3. Refunds: It is important to note that ITR-U cannot be used to claim refunds. It is specifically designed to report additional income or correct errors but does not allow for refund claims.
4. Impact on Tax Liability: While filing ITR-U may lead to an increase in tax liability due to additional income reporting, it is beneficial in the long run as it helps taxpayers avoid future tax disputes or penalties.
ITR-U vs Belated and Revised Returns
It’s crucial to understand the differences between an ITR-U, a belated return, and a revised return:
- Belated Return: Filed after the original deadline but before the last prescribed date (usually by December 31 of the assessment year). A penalty is imposed for late filing.
- Revised Return: Filed before the end of the assessment year or within a specified time frame, it is used to correct errors in the originally filed return.
- ITR-U: Filed after the belated return period has passed. This form is used for correcting mistakes but cannot be used for refunds.
Important Note
In the case of a belated return, the government imposes significantly higher taxes, and refunds are not issued to the assessee. However, if you have a genuine reason for the delay in filing your ITR and are facing a high tax burden due to penalties and interest, you may consider applying for the condonation of delay.
With condonation of delay, the additional tax amount (ranging from 25% to 70%) does not need to be paid. Moreover, if you are eligible for a refund, it can be issued to you. This provides a relief to taxpayers who have faced genuine delays and ensures they are not penalized excessively for circumstances beyond their control.
I have previously published an article that can guide you on how to apply for the condonation of delay under Section 119(2)(b), which provides a mechanism for addressing delays in filing the return. You can read it here:
https://taxguru.in/income-tax/condonation-delay-itr-filing-section-1192b.html
After going through this article, you’ll gain a clearer understanding of the process for filing a condonation of delay application. In my opinion, if you have valid reasons for the delay in filing your ITR, opting for condonation of delay might be a better choice than filing a belated return under ITR-U.
Conclusion
The Updated Income Tax Return (ITR-U) provides a vital opportunity for taxpayers to correct errors, omissions, or incomplete reports in their tax returns, ensuring they remain compliant with the Income Tax Department. While it can result in higher tax liabilities in some cases, it helps avoid future legal disputes and penalties. This provision, especially with its extended filing deadlines, serves as an important tool for taxpayers to stay in good standing with the tax authorities and rectify past mistakes. By taking advantage of ITR-U, individuals can safeguard themselves against potential tax-related issues while also ensuring accurate and updated tax filings.
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If you have any doubts or queries, or if you encounter any issues while filing your return, please feel free to contact me at phone number +91 9818640458 or via email at varunmukeshgupta96@gmail.com.
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