Updated Income Tax Return: Concept & Clarification
Updated Income Tax Return:
Concept & Clarification
Income Tax Return filing obligation is required to be carried out by the taxpayers in a time bound manner. Every taxpayer is required to file the income tax return within the due date. The return filed within the due date is referred to as the “Original Return”. If the return could not be filed within the due date then such person can file the “Belated Return” with a certain late fee. Further, if the person notices the error or omission in the original or belted tax return then such person can rectify it by filing the “Revised Return”.
Normally, taxpayers have a period of around 4 months (where the due date is July) or 7 months (where the due date is October) to file the Original income tax return and a further period of 2 months (where the due date is October) to 5 months (where the due date is July) to file Belated Return or Revised Return. However, the option to file the Belated Return or Revised Return is not available after December from the end of the relevant financial year. Even if the taxpayers want to declare the additional income or want to pay the additional tax, there is no option at present to do so voluntarily after 9 months from the end of the relevant financial year.
Recent Budget-2022 has provided an additional time period to the genuine taxpayers to file or rectify the income tax return within 3 years from the end of the relevant financial year by filing “Updated Return” albeit with some additional tax cost. This new provision will be helpful for all those taxpayers who may have inadvertently missed out on disclosing any income while filing their tax returns of earlier years or have failed to file the return for any reason whatsoever. The concept of “updated Return” has been introduced by adding sub-section 8A to section 139. Let us know more about it:
Payment of Additional Tax: The provision to file updated returns is a little more taxing. Those who wish to come clean have to pay an extra amount of 25% or 50% depending upon the period of delay. It is proposed that an amount equal to 25% of the tax & interest will be payable additionally if the updated return is filed within 2 years from the end of the relevant financial year. However, the additional tax would be 50% if the updated return is filed after 2 years from the end of the relevant assessment year.
Not for the Benefit of the taxpayers: Updated return can be filed only if it is beneficial to the income tax department. The route of updated return cannot be used by the taxpayers to claim benefits or concessions. Updated return cannot be filed if the it is a return of a loss or has the effect of decreasing the total tax liability determined on the basis of return furnished earlier or if it results in refund or increases the refund due on the basis of return furnished earlier.
Who cannot file Updated Return:
There are certain categories of taxpayers who are barred from filing the Updated Return. These are mostly the persons in whose case information is already there with the department or in whose case any other proceeding has been initiated by the department. To be more specific, following categories of persons are prohibited from filing updated return:
a) Taxpayers in whose case income tax raid has been carried out or where income tax survey (Other than TDS survey) has been conducted. Similarly, taxpayers who have been issued notice with regard to the money, bullion, jewelleryor valuable articles or things or books of accounts, seized or requisitioned in income tax raids or survey of any other person are also barred from filing updated returns.
b) Taxpayers in whose case any proceeding for assessment or reassessment or re-computation orrevision of income under the Act is pending or has been completed for therelevant assessment year
c) If the Assessing Officer has information in respect of the taxpayers for the relevant assessment year 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 Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and the same has been communicated to him, prior to the date of his filing updated return.
d) Taxpayers in whose case information for the relevant assessment has been received under anagreement referred to in sections 90 or 90A of the Act in respect of suchperson and the same has been communicated to the taxpayers prior to the filing of updated return.
e) Taxpayers in whose caseany prosecution proceedings under Chapter XXII have been initiated
One time offer for filing an Updated Return:
An updated return can be furnished only once. If a person has already filed an updated return, it cannot file the updated return again for the same assessment year at subsequent occasions.
Whether the Updated Return can be filed for FY 2018-19 or FY 2019-20:
The new provision would be effective from 1st April, 2022. It means that the person cannot file the updated return for the FY 2018-19. However, it can be filed for the FY 2019-20 & onwards.
Conclusions:
If a taxpayer has missed the date to file a belated or revised return, the new mechanism to file the updated return can help the taxpayers to come clean. The objective of introducing this facility is to promote voluntary tax compliance & reduce the litigations. Though there is some additional tax liability attached, it is still better considering the other penal consequences now involved for tax evasion.
