A change in the Updated Income Tax Return (ITR-U) procedure is been introduced by the Union Budget 2025 by surpassing the filing period by two more years. The same revision furnishes a longer window for taxpayers who forget to file or underreport their income. Let's discuss the current return filing procedure before comprehending the impact of change.
Step-by-Step Process
For the taxpayers to submit their returns the Income Tax Act specifies the due dates.
July 31, 2025, is the original deadline for the individuals for FY 2024-25 (ending March 2025) it is when the taxpayers are anticipated to show all their income and submit their return within time.
The taxpayers for emerging errors have the option to file to revise the return u/s 139(5). By December 31, 2025 anyone can revise their return if think of a mistake post-filing.
Belated Return Filing Under Section 139(4)
If any individual forgets the original due date they are allowed to file a return until December 31, 2025, but with limitations. One of the major restrictions is that losses (except house property loss) cannot be carried forward if the return is belated. Indeed Rs 5000 a late fee could be applicable.
But what takes place if someone forgets the belated return due date? ITR-U arrives there in.
Updated Tax Return?
An Updated Return (Sec 139(8A)) authorizes taxpayers to declare missed income even after the belated return due date has passed.
An updated return Under the previous rules (valid till March 2025) can be submitted within 2 years from the finish of the pertinent assessment year. For instance, if the taxpayer wishes to submit an updated return in February 2025, then they can merely file for FY 2021-22 and FY 2022-23.
However, updated returns come with restrictions like no refunds, no loss adjustments and no reduction of taxable income are permitted. On the undeclared income, the additional tax is liable to be filed.
The tax payable contains regular tax + interest under Sec 234A, 234B, and 234C. An additional tax of up to 50% on tax + interest
What would take place if, in reality, the taxpayers forget to report the specific income beyond 2 years? The budget 2025 extends the updated return filing period by two more years to address the same. It directed that from April 2025 onwards the taxpayers are allowed to furnish an updated return for FY 2020-21, in addition to the last two years. The cost of the delay rises.
The provision of the updated return is a valuable tool, it arrives at a higher financial cost. The effective way is to file the original return on time and confirm that all the income is declared precisely. Penalties and tax burdens are been averted from the timely compliance and assist the taxpayers to live in peace.
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