Updated Return - Boon or Bane for Taxpayers?

by Mansi Lotake

Articled Assistant

Through the Budget 2022 on 1st February 2022, the Government of India introduced the concept of Updated Income Tax Return under section 139(8A) of the Income Tax Act, 1961;
The Central Board of Direct Tax (CBDT) released a 1 Notification No. 48/2022 dated 29th April, 2022 , which notified a Rule 12AC for furnishing Updated Income Tax Return in Form ITRU as per the provisions of Section 139(8A) of the Income Tax Act.

The concept of Updated Income Tax Return was introduced by the Government to enable taxpayers to declare their missed-out Income and payment of additional taxes.
With the advancements in automation, technology , and artificial-intelligence , Government receives a wide range of information that has led to the belief that taxpayers should be given additional time to voluntarily furnish a correct updated return of Income Tax. Provision to furnish such correct updated return which is likely to reduce the potential litigation has been introduced by a new section 139(8A) in the Union Budget 2022.

Let us understand the provisions related to Updated Income Tax Return through following points: -

1. Who is not eligible to file ITR-U?

If an updated return is a return of a loss;
In case an updated return results in lower tax liability;
In case an updated return results in or increasing the refund;
In case of a search initiated against the assessee;
Where books of account or assets etc. are requisitioned in case of the assessee;
In case survey conducted against the assessee;
Where documents or assets seized or requisitioned in case of any other person belong to the assessee;
In case an updated return has already been filed;
In case assessment is pending or completed;
In case AO has information about the assessee under specified Acts;
In case AO has information about the assessee under DTAA or TIEA;
In case any prosecution proceeding is initiated; or
In case of a person or class of persons as notified by the CBDT.

2. From which assessment year ('AY') the ITR-U is applicable?

The provisions related to updated income tax return are applicable from AY 2020-2021 onwards.

3. Is there any fee or penalty levied upon taxpayer furnishing updated return?

No penalty or fee is levied upon a taxpayer who intends to furnish an updated return; however, he is required to pay an additional tax under Section 140B. l. In case any prosecution proceeding is initiated; or

The additional tax shall be equal to 25% of the aggregate of tax and interest payable by a person on the filing of the updated return, where such a return is furnished after the expiry of the due date of filing of belated or revised return but before completion of a period of 12 months from the end of the relevant AY.

Where the updated return is furnished after the expiry of 12 months from the end of the relevant AY but before completion of the period of 24 months from the end of the relevant AY, the additional tax payable shall be 50% of the aggregate of tax and interest payable.

4. Computation of Tax Payable with Updated Return

The below table shows the order of Computation of Total Tax Liability (including additional taxes and penalty for filing an updated return.

	Particulars	Amount
	Total Tax on Income	Xxx
Less:	Advance Tax	(xxx)
Less:	TDS (Tax deducted at source)	(xxx)
Less:	TCS (Tax collected at source)	(xxx)
Less:	Self-Assessment Tax	(xxx)
Less:	Relief u/s 89/90/90A/91	(xxx)
Less:	Tax Credit u/s 115JAA/115JD	(xxx)
	Basic Tax Payable	xxx
Add:	Interest u/s 234A, 234 B, 234C	xxx
	Tax Payable	xxx
Add:	Additional Tax (25% or 50% depending whether the updated return was filed within 12 months or 24 months respectively )	xxx
	Total Tax Payable	xxx

5. Updated Return V/s Revised Return

Let us understand key points of differences between updated return and revised return:

A taxpayer can file an Updated ITR even if an original or belated ITR has not been filed. However, the taxpayer cannot file a Revised ITR if an original or belated ITR has not been filed.
The taxpayer can file an Updated ITR only if there is an additional tax liability. In the case of a Revised ITR, there is no such restriction.
The taxpayer need not pay any penalty for filing a Revised ITR. However, the taxpayer must pay a penalty in form of an Additional Tax of 25% to 50% as per Section 140B for filing an Updated ITR.
Updated ITR can be filed only if there is an additional tax liability and not if there is a reduction in tax liability or an increase in the refund or claiming a loss. Revised ITR can be filed for multiple reasons such as claiming a loss, increasing refund, reduction or increase in tax liability, etc.
The taxpayer can file Revised Return multiple times while he/she can file Updated ITR only once.

Complete circular attached —> here

Conclusion

The finance minister raised hopes of taxpayers while introducing the Updated Return in her Budget speech. However, as the old saying goes, ‘all that glitters is not gold’. The taxpayers have to carefully evaluate the pros and cons of filing an Updated Return, on a case-to-case basis, to ensure they get value in return.