FA 2022 introduced a new scheme4 under the ITL, effective from 1 April 2022, permitting all taxpayers to file an “updated return” within 36 months from the end of the relevant tax year, subject to various conditions. While furnishing updated return, the taxpayer is also required to pay an additional tax of 25% or 50% (as the case may be) on tax and interest due on such updated return while providing for immunity from penalty and prosecution. The scheme also applies even where no tax return was filed previously for a given year. This new scheme has been introduced with the object of providing an opportunity and additional time for voluntary compliance by taxpayers in rectifying errors in the last valid return filed and to reduce litigation. Further, the updated return is required to be filed in a form to be prescribed by CBDT under the new scheme.
Notification No.48/2022 dated 30 April 2022 is issued by the Central Board of Direct Taxes (CBDT) which amends the Income Tax Rules, 1962 by inserting Rule 12AC which provides for tax return form (Form ITR-U) and the manner for furnishing updated return.
The Notification is issued pursuant to the introduction of the new scheme under the Income Tax Laws (ITL) by Finance Act (FA) 2022, which permits all taxpayers to file an “updated return” within 36 months from the end of the relevant tax year, subject to various conditions. While furnishing updated return, the taxpayer is also required to pay an additional tax of 25% or 50% on tax and interest due on such updated return while providing for immunity from penalty and prosecution. The scheme is introduced with the object of providing an opportunity for voluntary compliance by taxpayers in order to rectify errors in the last valid return filed and to reduce litigation.
The CBDT, in deference to powers conferred under such new scheme, has notified the Rule containing the new tax return form and the manner to furnish such updated return.
The updated return has to be furnished in Form ITR-U, along with an updated version of applicable tax return form (Form ITR 1 – 7). In addition to routine details of name, permanent account number (PAN), tax years, additional income reported etc., Form ITR-U requires taxpayer to select reason for submitting updated return from out of the eight options provided, including
(1) return previously not filed or
(2) income not reported correctly or
(3) wrong head of income chosen or
(4) wrong rate of tax or
(5) reduction of carried forward losses, unabsorbed depreciation (UAD) or Minimum Alternate Tax (MAT) credit/Alternate Minimum Tax (AMT) credit.
If taxpayer is furnishing updated return to reduce carried forward losses, UAD or MAT credit/AMT credit, then Form ITR-U requires taxpayer to specify also the tax years wherein such carried forward loss, UAD or MAT credit/AMT credit, are affected because of such updated return, with an information whether any revised return or updated return has been filed for such affected tax year/s.
Form ITR-U also provides for involved method for working of tax liability on additional income and additional tax liability @ 25%/50%, as the case may be.
What is Income Tax Updated Return (ITR-U)
Updated return is a type of return on income u/s 139(8A) of the Income Tax Act 1961 to be filed using Form ITR-U. It allows taxpayers to:
File Return of Income Not Filed Earlier
Make Corrections in Disclosure in Income Tax Return
Fix or Change the Head of Income
Reduce the Carry Forward Loss
Reduce Unabsorbed Depreciation
Reduce Income Tax Credit and More
Who Should File ITR-U (Income Tax Updated Return) Form?
Any taxpayer can file an updated return whether he has submitted his original/revised/delayed return of income or not.
When did the Provisions Become Effective?
1st April 2022
Deadline for Filing an Income Tax Updated Return
The updated return can be furnished within 24 months from the end of the specific assessment year. For example, for the assessment year 2022-23, an updated return can be filed by 31 March 2025.
When You Can’t Submit an Updated Return?
In the following circumstances, an updated return cannot be furnished if:
The updated return is a return of the loss
The updated return is reducing the income tax liability from the return filed earlier
The updated return result increases the refund
The search has been started under section 132
Books of accounts or any other document are called for under section 132A.
A survey is done under section 133A
Any proceeding of assessment, revaluation, recalculation, or revision is pending or completed in that year.
The AO has information against such person under the Prevention of Money Laundering Act or Black Money (Undisclosed Foreign Income and Assets) and Tax Act or Benami Property Transactions Act or Smugglers and Foreign Exchange Manipulation Act and the same have been reported to the assessee.
Other Notified Person
How to Calculate Income Tax Updated Return via Simple Process?
Section 140B of the Income Tax Act 1961 provides the procedure to calculate income tax on an updated return.
Payable Tax + Interest + Payble fees for nonfiling of Income Tax (if any) + Payable amount as Additional Tax (For taking benefit of Section 139(8A))= Total Income Tax Liability.
Total Income Tax Liability (from above) – TDS/TCS/Advance Tax/Tax Relief etc = Net Tax Liability u/s 140B.
Short Brief of Additional Tax Liability
To avail the benefit of section 139(8A), the assessee is required to pay additional tax computed as under:
25% of tax, HEC, SC, and interest as calculated above, if an updated return is to be filed within 12 months from the end of the assessment year.
50% of tax, HEC, SC, and interest as calculated above if an updated return is to be filed after 12 but before 24 months.
Steps to File ITR-U (Income Tax Updated Return) Form
Part A: General Information-139(8A)
PAN
Aadhaar Number
Assessment Year
Whether return previously filed for this assessment year? (Yes/No)
If yes, Whether filed u/s 139(1) Others
If applicable, enter form filed, Acknowledgement no. or Receipt No. and Date of filing the original return (DD/MM/YYYY)
Are you eligible for filing an updated return as per the conditions laid out in the first, second and third provisos to section 139(8A)? (Yes/No)
Please choose the ITR form for updating your income (ITRs 1-7 to be selected from the drop-down and filled as per the details made available by the e-filing utility – see instruction)
Are you filing the updated return during the period up to 12 months from the end of the relevant assessment year between 12 to 24 months from the end of the relevant assessment year
(A12) (a) Are you filing the updated return to reduce carried forward loss or unabsorbed depreciation or tax credit? Yes No
(A12) (b) If yes, please specify the assessment years where carried forward loss or unabsorbed depreciation or tax credit is being affected because of this updated return
Part B: ATI Computation Of Total Updated Income And Tax Payable
1 (A) Head of income under which additional income is being returned as per Updated Return
1 (B) Total income as per last valid return (only in cases where the Income Tax Return has previously been filed)
Total income as per Part B-TI
The amount payable, if any (To be taken from the ―Amount payable of Part B-TT of the updated ITR)
Amount refundable, if any (To be taken from ―Refund‖ of Part B-TTI of the updated ITR
The amount payable on the basis of last valid return (only in applicable cases)
6. (i) Refund claimed as per last valid return if any (Please see instruction)
6. (ii) Total Refund issued as per last valid return, if any (including interest u/s 244A received
Fee for default in furnishing return of income u/s 234F
Regular Assessment Tax, if any
Aggregate liability on additional income
Additional income-tax liability on updated income [25% or 50% of (9-7)]
Net amount payable (9+10)
Tax paid u/s 140B
Tax due (11-12)
Tax Payments (Only as per Updated Return)
Details of payments of tax on updated return u/s 140B
Details of payments of Advance Tax / Self-Assessment Tax / Regular Assessment Tax, credit for which has not been claimed in the earlier return (credit for the same is not to be allowed again under section 140B(2) )
Note: Credit for the above is not to be allowed again under section 140B(2)
. Relief u/s 89 which is not claimed in earlier return [relief for the same is not to be allowed under section 140B(2)]
Verification
I, son/ daughter solemnly declare that to the best of my knowledge and
belief, the information is given in the return is correct and complete and is in accordance with the provisions of the income-tax Act, 1961. I further declare that I am making this return in my capacity as _(drop-down tobe provided in e-filing utility) and I am also competent to make this return and verify it. I am holding a permanent account number. (Please see instruction).