Taxpayers who missed the deadline to file income tax returns (ITRs) could file a belated ITR by December 31, following the end of the financial year (FY). However, if this deadline is also missed, section 139(8A) enables those taxpayers to furnish an updated return.
Currently, such taxpayers can furnish an updated return for a FY, within 24 months from the end of the relevant assessment year (AY) — within 36 months from the end of that FY. This deadline has been now extended up to 48 months from the end of the relevant AY or 60 months from the end of the FY, as part of the Budget proposals, to encourage voluntary compliance among taxpayers. In the absence of voluntary compliance, they may be subjected to tax notices, assessments by the department and consequential penal provisions.
For instance, for FY25, the deadline for belated return would be December 31, 2025. As per the proposed extended deadline for updated return, a taxpayer can file an updated return for FY25 by March 31, 2030.
It is to be noted that an updated return cannot be furnished if it has the effect of claiming losses. If at all a taxpayer had filed an ITR within the prescribed deadline or a belated ITR or a revised ITR, and he or she wants to file an updated return to bring down the tax outgo or to claim more refund, the income tax law does not permit it. The Budget proposals are unchanged on this.
At a cost
However, taxpayers opting for an updated return need to foot an additional tax liability over and above the taxes (includes surcharge and cess) and interest that would be payable had he or she furnished ITR in time (hereinafter referred to as aggregate taxes and interest). Such additional tax liability is measured as a percentage of aggregate taxes and interest.
Currently, the additional tax liability for an updated return filed within 12 months from the end of the AY is 25 per cent of aggregate taxes and interest and the rate is 50 per cent if filed within 24 months from the end of the AY. These rates remain. The rate of additional tax liability in cases where the updated return is filed within 36 months/ 48 months from the end of the AY have been proposed at 60 per cent and 70 per cent respectively.
What will not work
The Budget documents also include a case where the updated return cannot be furnished. In case a taxpayer has been served with a notice under section 148A (show-cause notice for income escaping assessments), after the end of 36 months from the end of the relevant AY, then he or she cannot furnish an updated return.
However, if an order is passed subsequently deeming the case of the taxpayer as not fit to be taken up for an income escaping assessment, then he or she is free to file an updated return.
The above proposals are set to be effective from April 1, 2025.
