What is an updated Return?
The Indian government announced in union budget 2022 an option for taxpayers to correct their IT Returns by the new updated return. As the name says, this return allows taxpayers to correct any omissions or errors in their income tax returns, discovered after the time limit for filing the revised return has lapsed.
An updated tax return which was introduced by Finance Minister Nirmala Sitharaman in the Union budget 2022, allows taxpayers to rectify any incorrect disclosure of income within two years of the end of the relevant assessment year (AY). The updated return can be helpful for the taxpayers who may have unintentionally missed out on disclosing any income while filing their income tax returns.
Accordingly, if taxpayer filed a return on December 31, 2021, then the assessment year ends on March 31, 2022, and file the updated return under section 139(8A) till March 31, 2024.
Who can file Updated Return?
An updated return can only be filed if it results in the assessment of additional tax liability that means if taxpayer declare a loss and reduce total tax, then updated return cannot be filed. Loss that can decrease the total tax liability is not permitted under the updated return.
Also, if taxpayer claim refund or increase the amount of refund, then updated return cannot be filed and if IT return has been selected for re-assessment then also taxpayer wouldn’t be able to update the return for that assessment year.
Penalties for filing updated Return
If taxpayer file the updated return within 12 months of the end of the relevant assessment year, then he will be liable to pay a penalty equivalent to 25% of the tax and interest payable.
If taxpayer file the updated return between 12 and 24 months of the end of the relevant assessment year, the penalty will increase to 50%