Updated Return under Income Tax Act
Filing of Updated Income Tax Return
Finally, provision of filing an updated income tax return has been introduced in Income Tax with effect from 01.04.2022. An assessee, whether he has filed or not, an income tax return (whether it be the original return, the belated return or the revised return), may now furnish an updated return of income, within two years from the end of relevant assessment year. For eg: For the AY 2022-23 (i.e. FY 2021-22), the updated return could be filed upto 31st March, 2025. Also, the updated return can be furnished only once for an assessment year. However, the updated return cannot be filed, if it
a) is a return of loss or
b) has the effect of decreasing the tax liability determined as per previously filed return or
c) results in refund or increases the refund determined as per previously filed return
Persons who cannot file updated return
A person shall not be eligible to file an updated return for the relevant assessment year and any year preceding to that, if in the relevant previous year –
a) a search or survey has been initiated/ conducted against him or
b) books of accounts/other documents/ any assets are requisitioned or
c) a notice has been issued to the effect that any asset seized or requisitioned in the case of any other person, belongs to him or
d) a notice has been issued to the effect that any books of account or documents, seized or requisitioned in the case of any other person, pertains/relates to him
For eg: If search has been initiated against the person in FY 2022-23, then the updated return cannot be filed for the relevant AY 2023-24 or any preceding assessment year.
Updated return cannot be filed for the year in respect of which:
a) any assessment/reassessment/re-computation/revision of income is pending or has been completed
b) prosecution proceedings have been initiated
c) the assessing officer has any information about the assessee, under double taxation avoidance agreements or under the following Acts, which has already been communicated to him, prior to the filing of such return –
i. the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
ii. the Prohibition of Benami Property Transactions Act, 1988
iii. the Prevention of Money-laundering Act, 2002
iv. the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Case where filing of updated return is mandatory for subsequent years too
If any person has originally filed a return of loss for any previous year, duly within the time allowed for filing the original return, then he shall be allowed to furnish an updated return, if the updated return is a return of income, irrespective of the time limit of two years from the end of relevant assessment year. However, in such a case, the assessee will have to furnish an updated return for each subsequent previous year, if
a) such loss or even the unabsorbed depreciation has been carried forward or
b) Tax credit in in respect of tax paid on deemed income relating to certain companies or Tax credit for alternate minimum tax is to be reduced as a consequence of filing the updated return.
Tax on Updated Return
The taxation norms in case of an updated return would however be somewhere different form the normal income tax return. The assessee will have to pay an “additional income-tax” along with the tax and interest computed to be payable, if filing an updated return.
Additional Income-Tax
The additional income-tax payable in case of updated return shall be equal to –
I. 25% of the aggregate tax and interest payable, if the updated return is furnished after the expiry of time available for filing belated return or the revised return but before the completion of twelve months from the end of relevant assessment year.
II. 50% of the aggregate tax and interest payable, if the updated return is furnished after the expiry of twelve months but before the completion of twenty-four months from the end of relevant assessment year.
Also, the proof of payment of tax, additional income-tax, interest and fee shall accompany such return.
Conclusion: At this, one may conclude that the introduction of provision for filing an updated return would result in avoidance of litigation to a good extent. If any income has been left to be reported by the assessee in the return originally filed or the revised return, then the updated return results in an opportunity to rectify such mistake. Otherwise, assessment proceedings would have been initiated against him, which the assessee always wants to avoid, as he will have to incur the consulting fees of professionals for responding the proceedings and then will pay the tax on that income on the conclusion of such proceedings.