Updated return of income is a new concept introduced to our tax laws by the finance bill 2022. Government has introduced section 139(8A) and section 140B to bring in the provisions of updated income tax return.
Provisions of updated return of income will be applicable with effect from financial year 2021-22 (assessment year 2022-23).
As per section 139(8A), any person, whether or not he has furnished a return under section 139(1), 139(4) or 139(5) for an assessment year, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under the Act, for the previous year relevant to such assessment year within 24 months from the end of the assessment year.
This means any taxpayer can file an updated return whether or not he has furnished an income tax return. However, it has to be filed within 24 months or 2 years from the end of the assessment year relevant to the previous year for which an updated return is to be filed.
For the financial year 2021-22, the assessment year is 2022-23. Updated return for the financial year 2021-22 can be filed within 24 months from the end of assessment year 2022-23. This means, updated return of income for the financial year 2021-22 can be filed on or before 31st March 2025.
Who can’t file updated return of income
Government has allowed all taxpayers to take advantage of updated returns. However, they have specifically excluded certain cases where the assessee can’t take benefit of updated return of income filing.
Here are those cases where the assessee can’t file an updated income tax return.
Provisions of section 139(8A) shall not apply if the updated income tax return is a return of a loss or it has the effect of decreasing the total tax liability determined on the basis of return furnished under section 139(1), 139(4) or 139(5).
This means, you can not file updated income tax return to file a loss return or to decrease your tax liability.
You can not use section 139(8A) to file an updated return if it results in refund or increases the refund due on the basis of return furnished under section 139(1), 139(4) or 139(5).
If you have already furnished an updated return of income for one assessment year, then for that same assessment year, you can not file another updated return.
Here are some more cases where updated return of income can not be filed;
- If any proceeding for assessment or reassessment or recomputation or revision of income under the act is pending or has been completed for the relevant assessment year.
- The assessing officer has information in respect of such person for the relevant assessment year in his possession under the prevention of money laundering act, 2002 or the black money (undisclosed foreign income and assets) and imposition of Tax Act, 2015 or the prohibition of benami property transactions act, 1988 or the smugglers and foregin exchange manipulation (forfeiture of property) Act, 1976 and the same has been communicated to him prior to the date of his filing of updated return of income under section 139(8A).
- Where information for the relevant assessment has been received under an agreement referred to in section 90 or 90A of the Act in respect of such person and the same has been communicated to him prior to the date of his filing of return under section 139(8A).
- Where any prosecution proceeding under chapter XXII of the act has been initiated for the relevant assessment year in respect of such person, prior to the date of his filing of return under section 139(8A).
- He is a person or belongs to a class of persons, as may be notified by the Board in this regard.
Applicability of updated return in case of search and seizure
A person shall not be eligible to furnish an updated return under section 139(8A), if:-
- search has been initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of such person.
- a survey has been conducted under section 133A other than sub section 2A of that section in the case of such person.
- 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.
- 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, relate to, such person for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and for any assessment years preceding such assessment year.
If any person has sustained a loss in any previous year and has furnished a return of loss under section 139(1), then he shall be allowed to furnish an updated return where such updated return is a return of income. Provision of filing an updated return will help taxpayers to avoid any penalty for under-reporting or misreporting of income in their return.
Updated 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. However, an updated return of income may attract additional tax if it is not filed within the last date of filing income tax return.
How is updated return different from revised return?
A revised return can not be filed without filing the original income tax return. However, an updated return can be filed within 2 years from the end of the relevant assessment year if you have not filed your original return.
By filing a revised return you can rectify anything in your tax return. However, we have restrictions on updated returns. For instance, you can not reduce your tax liability by filing an updated return.
Last date of filing a revised return is 31st December of the relevant assessment year, while an updated return can be filed within 24 months from the end of the relevant assessment year.
We don’t have any penalty for filing revised returns, however, an updated return carries a penalty of 25%-50% of the tax liability.
Summary
- You can file an updated return even if you did not file the original return.
- Updated 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 return can not result in a decrease of the income you reported in your original return.
- Filing updated return within 12 months of the end of the relevant assessment year, you will be liable to pay a penalty equivalent to 25% of the tax and interest payable. If it’s filed between 12 and 24 months of the end of the relevant assessment year, the penalty will increase to 50%.