Income Tax

Casting light on the concept of Updated Income Tax Return

Finance minister, in her budget 2022 speech, had announced about the provision of filing updated tax return. This will provide taxpayers the opportunity to correct an error or report any income that was missed in the original return. Let’s discuss more on the newly inserted sub-section 8(A) in section 139 for furnishing the updated income tax return and also discuss a few already existing concepts such as original return, revised return and belated return.

Original, Revised and Belated Return

• Original Return means a return filed within the prescribed due dates;
• Revised Return refers to the return filed by an assessee where after filing a return, the assessee then realises that some information has been missed and subsequently files return again;
• Belated Return refers to the return that is filed after the expiry of the due date.

What is an updated income tax return?

Any person who has furnished original return of income under sub-section (1) or has furnished a belated return under sub-section (4) or furnished  a revised return can now furnish an updated return in case there was any omission or wrong statement in the return filed earlier.

If the person has not furnished his income return, the person can furnish an updated return under the newly inserted sub-section 8(A) of Section 139 of the Act. This will allow a person to update its revised return and belated return even after the end of the relevant assessment year. The newly proposed sub-section 8(A) will apply to all person.

Cases where updated return cannot be filed

In the following cases, updated return can’t be filed:

• In case of return of loss, or;
• In case the updated return has the effect to reduce the tax liability determined based on the return submitted under sub-sections (1), (4), or (5) of Section 139 or;
• If it results in refund or if it raises the refund amount due on the basis of return furnished under sub-sections (1), (4), or (5) of Section 139 or;
• Where in case of such person a search has begun under Section 132 or books of account, other document  or any assets have been requisitioned under Section 132A;
• Where in case of such person a survey has been conducted under Section 133A other than sub-section (2A) of that section;
• In case a notice is issued to the effect that any valuable article, or a thing, seized/requisitioned under Section 132 or Section 132A belongs to such person;
• If a notice has been issued to the effect that any books of account/documents, seized or requisitioned under Section 132/Section 132A, in case of other person, pertains to or any other information therein relate to such person;
• In case intimation for relevant AY is received under an agreement referred to in Section 90/90A of the Act of such person and it has been communicated to him before the date of filing of the return under sub-section 8(A) of section 139 of the Act or;
• In case a prosecution under Chap. XXII has been initiated for the relevant AY in respect of such person before the return filing by such person under sub-section 8(A) of section 139 of the Act.

In all these cases, sub-section 8(A) of Section 139 shall not apply.

Time limit for filing updated income tax return

The updated return can be furnished within 24 months from the end of the relevant assessment year.

Example: For FY 2021-22, the assessment year ends on 31 March 2023. Thus, Updated Return may be furnished by the assessee up to 31 March 2025.

Updated Return (Section 140B): Additional Tax Payment

According to Section 140B of the Act, an assessee must pay additional tax and submit the proof of tax payment along with updated return of income.

In this, two situations may arise. One is where the person has furnished the return of income under section 139(1), section 139(4), or 139(5) of the Act or where the return of income has not been furnished.

If the assessee has furnished return of income under sub-sections (1), (4), or (5) of section 139, then he will be liable to pay the tax due with the interest and fee payable for delay in furnishing return of income or any default or delay in the advance tax payment along with the additional tax payment as reduced by the amount of interest paid in the earlier return.

The tax payable will be calculated after considering:

• Self-assessment tax, advance tax, TDS or TCS claimed in earlier return;
• Relief of tax or TDS claimed under Section 90 and 91 with respect to the tax paid in a country outside of India on income that has not been claimed in earlier return;
• Relief of tax claimed under Section 90A of the Act with respect to the payment of tax in any specified territory outside India referred to in that section on income that hasn’t been claimed in earlier return;
• Tax credit claimed, to be set off under Section 115JAA/Section 115JD that hasn’t been claimed in an earlier return.

If the assessee hasn’t furnished return of income, then he will be liable to pay the tax due with the interest and fee payable for delay in furnishing the return of income or any default or delay in the advance tax payment along with the additional tax payment as reduced by the interest amount paid in the earlier return.

The tax payable will be calculated after considering:

• Advance tax, TDS or TCS;
• Relief of tax claimed under Section 89, if any;
• Tax Relief or TDS claimed under Section 90 & Section 91 with respect to the payment of tax in a country outside India on such income;
• Relief of tax claimed under Section 90A of the Act with respect to the payment of tax in any specified territory outside India referred to in that section
• Tax credit claimed, to be set off under Section 115JAA/Section 115JD.

It may be noted that additional tax will be 25% of the aggregate of tax and interest to be paid in updated return, in case where the updated return is furnished after exhausting the time limit of filing revised or belated return but before the end of 12 months from the end of the relevant AY.

Further additional tax will be 50% of the aggregate of tax and interest payable in Updated Return, in case where the Updated Return is furnished after the 12 month period from the end of the relevant AY but before the end of 24 months from the end of the relevant Assessment Year.

Conclusion

Experts believe that giving taxpayers^[1] the opportunity to file updated income tax return to report any erroneously missed out income or to correct errors is a much-awaited tax reform. The previous timeline for updating income tax return was 3 months from the end of relevant AY.

Read our Article:Income Tax Refunds for AY 2021-22: 1.5 Crore Refunds Issued