Updated income tax return (ITR-U)

Till last few years income tax return were allowed to be filed or revised for last 2 to 3 years. In past it was common that people would revise their ITR for last few years if they observed any discrepancy. Subsequently, this period was reduced and income tax return could be filed within one year only. For example FY 20-21's ITR can be filed till 31st March 2022. And revision in income tax return was also allowed till aforesaid time limit.

Later on, it was noted that the tax litigation was increasing due to incomes not considered in the income tax return. To reduce tax litigation, the income tax department has come up with a new form. In this form the taxpayer can voluntarily declare an income which was not shown or incorrectly shown in previously filed ITR. This form is ITR-U.

What is the new ITR form?

In the new form, ITR-U, the taxpayer will need to provide the exact reason for filing the updated income tax return (ITR) and the amount of income liable to tax. However, they will not be required to provide a break-up of that income.

When would taxpayers need to file ITR-U?

Cases in Which ITR-U Can be Filed:

• Return Previously not filed

• Income not reported correctly

• Wrong Heads of Income Chosen

• Reduction of Carried forward losses

• Reduction of unabsorbed Depreciation

• Reduction of Tax Credit u/s 115JB/115JC

• Wrong rate of tax

Cases in which ITR-U Form Can NOT be filed:

• NIL Return

• Loss Return

• Increase in Refund/Claiming of Refund

• Search/Survey/Prosecution Proceedings are Initiated for said A.Y.

• Assessment/Reassessment/Revision/Recomputation is Pending or Completed for Said A.Y.

• Late fees and Additional Fees will also be Charged

• Challan Details (Additional Payment) dealt Under Section 140B

What is the period during which ITR-U can be filed?

ITR-U will be available for filing updated tax returns for FY 2019-20 onwards.

ITR-U can be filed within two years from the end of the relevant assessment year. For Example FY 2019-20's ITR U can be filed till 31st March 2023 and so on.

How many times can a taxpayer update their income tax return in an assessment year?

Taxpayers will be allowed to file only one such correction (updated return) per assessment year.

Government Approach

The government is attempting to furnish an opportunity to the assessee to reveal their income which is omitted to be shown previously while on the other side it would generate more revenue for the government. This would optimize the compliance to the assessee in a litigation-free environment.

Under what circumstances is ITR-U unavailable to the taxpayer?

If a prosecution proceeding is initiated by issuing notice for a particular assessment year, the taxpayer cannot file ITR-U for that particular year.

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 + Payable fees for non-filing 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

Additional Interest Payment:

To avail the benefit of section 139(8A), the assessee is required to pay additional tax computed as under:

S.No.	Particulars	Rate of Interest
1	If Updated ITR is filed Within 12 Months From end of Relevant A. Y.	25%
2	If Updated ITR is filed After 12 Months But before 24 Months From end of Relevant A. Y.	50%

If a taxpayer files an updated return but does not pay the additional taxes, the return will be considered invalid.

Steps to File ITR-U (Income Tax Updated Return) Form

Part A: General Information-139(8A)

• PAN

• Name

• Aadhaar Number

• Assessment Year

• Whether return previously filed for this assessment year? (Yes/No)

• If yes, whether filed u/s 139(1) OR 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)

• Reasons for updating your income

• Are you filing the updated return during the period - up to 12 months from the end of the relevant assessment year OR between 12 to 24 months from the end of the relevant assessment year

• (a) Are you filing the updated return to reduce carried forward loss or un-absorbed depreciation or tax credit? - Yes OR No

• (b) If yes, please specify the assessment years were carried forward loss or un-absorbed depreciation or tax credit is being affected because of this updated return

Part B: Adjusted Taxable Income (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

• 2 Total income as per Part B-TI

• 3 The amount payable, if any (To be taken from the ―Amount payable of Part B-TT of the updated ITR)

• 4 Amount refundable, if any (To be taken from ―Refund‖ of Part B-TTI of the updated ITR

• 5 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

• 7 Fee for default in furnishing return of income u/s 234F

• 8 Regular Assessment Tax if any

• 9 Aggregate liability on additional income

• 10 Additional income-tax liability on updated income [25% or 50% of (9-7)]

• 11 Net amount payable (9+10)

• 12 Tax paid u/s 140B

• 13 Tax due (11-12)

• 14 Tax Payments (Only as per Updated Return)

o Details of payments of tax on updated return u/s 140B

o 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)

• 15 Relief u/s 89 which is not claimed in earlier return [relief for the same is not to be allowed under section 140B (2)]

How to verify the Updated return:

• For Tax Audit Cases: Digital Signature

• For Non-Tax Audit Cases: EVC Option will be Available

• Courier to Bangalore option has not specified yet.

For more information feel free to reach us in this regard.

Compiled by - Mugdha Bhansali