The Finance Bill 2022 has inserted a new section, Section 139(8A) in Income Tax Act. This new section provides for facilitating filing of ‘Updated Return’ by the taxpayers. This section has effect from 1st April 2022.

A taxpayer can file an updated return within two years from the end of the relevant Assessment Year. Thus, a taxpayer can now file an updated return for period from AY 2020-21. Updated return can be filed irrespective of the fact that whether the original return was filed by the taxpayer or not. However, to file an updated return, the taxpayer has to meet the below-mentioned conditions:

1. The updated return can be filed only if the taxpayer has to disclose any additional income, which was missed / omitted earlier, and pay the additional tax thereon.

2. Updated return cannot be filed to reduce any income and report loss or increase the loss thereby resulting in reduction of tax liability or increase in tax refund.

3. The option of updated return can be opted only once for one assessment year.

4. If the updated return is being filed within 12 months from the end of the relevant assessment year, then an additional income tax of 25% and interest thereon shall be payable.

Update Income Tax Return - Overview

5. If the updated return is being filed within the period of 13 months to 24 months from the end of the relevant assessment year, then an additional income tax of 50% and interest thereon shall be payable.

6. While filing an updated return, the proof of payment of additional income tax & interest thereon shall have to be submitted by the taxpayer.

7. A taxpayer cannot file an updated return in case of search & seizure or case where any prosecution proceedings have been initiated against the taxpayer.

Although the additional income tax along with the interest thereon constitutes in higher tax liabilities and appears as a burden on a taxpayer, this facility of filing an updated return can also be viewed as an opportunity to disclose the earlier missed income and save oneself from any legal proceedings and prosecutions. If the Assessing Officer believes that the assessee has escaped any income to be reported in Income Tax Return or has under reported the income, such Officer has a power to assess or re-assess such income. In case of under-reporting of income, a penalty as high as 50% of the tax payable could be levied & for misreporting of income could lead to a levy penalty as high as 200% of the tax payable on the misreported income. Thus, the provision of filing of Updated Return should act like an opportunity window to save oneself from paying extra amount in form of penalty.

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