Updated Return in the Income Tax Act, a new concept added by the Finance Bill, 2022

The current provision of the income tax act requires the assessee to file its voluntary income tax return latest by 31st Dec of the relevant assessment year (including the timeline for belated and revised return).

In view to enhancing voluntary tax compliance and reducing the tax litigation, Finance Bill, 2022 introduced the concept of updated return, thereby promoting the voluntary disclosure of income if any that may have escaped in the regular return, or the assessee could not file its regular return till 31st Dec. This updated return can be filed by the assessee within two years from the end of the relevant assessment year with the payment of additional taxes (including normal taxes). Additional tax means the top-up tax @ 25% or 50% of tax including interest, surcharge, and cess payable in the updated return. 25% is applicable once an updated return is filed before 12 months from the end of the relevant assessment year else it would be 50%.

Updated return cannot be filed in the following cases

1. If it is a return of loss or has the effect of decreasing the tax liability or increasing the refund.

2. a search has been initiated u/s 132 or books of account or other documents or any assets are requisitioned u/s 132A in case of such person.

3. a survey has been conducted u/s 133A, other than sub-section (2A).

4. a notice has been issued to the effect that any money, bullion, jewellery, or valuable article or thing, seized or requisitioned under section 132 or section 132A in the case of any other person belongs to such person.

5. a notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 132 or section 132A in the case of any other person, pertain or pertains to, or any other information contained therein, related to, such person,

6. an updated return has been furnished by him under this sub-section for the relevant assessment.

7. any proceeding for assessment or reassessment or recomputation or revision of income under this Act is pending or has been completed for the relevant assessment year in his case.

8. AO has information for such person under PMLA Act, Black Money Act, Benami, SFEM Act prior to furnishing return under this act.

9. information for the relevant assessment year has been received under an agreement referred to in section 90 or section 90A in respect of such a person.

10. any prosecution proceedings under the Chapter XXII have been initiated for the relevant assessment year.

Updated Return under Income Tax Act 1961 - A new concept

For points, 2 to 5 updated returns can not be filed for the assessment year relevant to the previous year in which such search is initiated or survey is conducted, or requisition is made and two assessment years preceding such assessment year

Interest payable u/s 234A, 234B, and 234C will be calculated on the amount of tax on the total income as declared in the updated return.

As the interest u/s, 234A and 234B is paid on assessed tax, that may include the additional tax, therefore it has been provided that for calculation of interest payable u/s 234A and 234B, additional income tax (25% or 50% as the case may be) shall not be considered.

For this new subsection (8A) to section 139 and new section 140B has been proposed and corresponding changes have been proposed in sections 234A and 234B

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