How to File an Updated Income Tax Return (ITR-U) in India

How to File an Updated Return (ITR-U)

The updated return, also known as ITR-U, was introduced in the Union Budget of 2022 to offer taxpayers a second chance to file their income tax returns. It allows individuals who missed the filing deadline or need to correct errors in their initial return to make necessary adjustments. The Income Tax Department of India has developed specific regulations and forms to simplify this process. The ITR-U form enables taxpayers to amend any mistakes or omissions made during their original filings.

Taxpayers may correct errors in their initial return under the provisions of Section 139(8A), without fearing legal repercussions for providing inaccurate information.

Eligibility for Filing ITR-U

Eligible Individuals

Taxpayers are permitted to file an ITR-U if they meet any of the following conditions:

Previously unfiled return
Income inadequately documented
Incorrect selection of income heads
Reduction of carried forward losses
Underreported depreciation
Reduction of tax credit under Sections 115JB and 115JC
Utilization of an incorrect tax rate

Ineligible Individuals

Conversely, individuals may not file an ITR-U if:

A modified return has already been submitted
The modified return results in a loss
The modified return reduces the tax liability of a previously filed return
The modified return increases the refund amount
Section 132 has been invoked to initiate a search
The assessee has been notified by the Assessing Officer in relation to information under the Prevention of Money Laundering Act, the Black Money (Undisclosed Foreign Income and Asset) Imposition of Tax Act, the Benami Property Transactions Act, or the Smugglers and Foreign Exchange Manipulators Act.

Procedure for Filing Form ITR-U

The Income Tax Department mandates that the ITR-U be submitted in two sections:

Part A: Basic Details

Specify the Assessment Year for which you are filing the updated return, along with your PAN and Aadhaar Number.
Confirm eligibility to submit the amended return, ensuring no circumstances prevent the filing.
Provide reasons for updating income, which may include inaccurately reported income or past return errors.
Indicate whether the amended return is being filed within 12 months of the end of the relevant Assessment Year, or between 12 and 24 months.
Declare if the filing is meant to obtain a tax credit, lower carried forward losses, or reduce unabsorbed depreciation.

Part B: Updated Income and Tax Calculations

Document any additional income as per the Updated Return.
State the total income declared on the most recent valid return (only if a prior return was filed).
Provide the total revenue per Part B-TI.
Indicate any dues (if applicable) to deduct from the amended ITR's amount due in Part B-TT.
Specify the refundable amount, if any.
Calculate the amount due based on the latest valid return (if applicable).
State the refund request as per the latest valid return, if any.
Mention the total refunds per the latest valid return, including any interest as accrued under Section 244A.
Include details of regular assessment tax.
Report any Advance Tax, Self-Assessment Tax, and Regular Assessment Tax payments that were not claimed as credits in the previous return (as credits cannot be reapplied under Section 140B(2)).
Include any relief under Section 89 not previously claimed, noting Section 140B(2) prohibits re-application of the same relief.

Time Limit for Filing ITR-U

Taxpayers must file their updated returns within a specified timeframe. The deadline is 24 months following the end of the relevant assessment year. The deadlines for specific assessment years are as follows:

Assessment Year 2021-22: Last filing date - 31 March 2024
Assessment Year 2022-23: Last filing date - 31 March 2025
Assessment Year 2023-24: Last filing date - 31 March 2026

Penalties for Late Filing

Late filing penalties apply if returns are filed after the stipulated deadlines. If the return is submitted within one year following the assessment year’s conclusion, an additional 25% of the tax liability and any unpaid interest must be paid. If filed between one and two years post-assessment year, the penalty increases to 50% of the additional tax and interest owed.

Verification of ITR-U

Taxpayers can authenticate their ITR-U via:

An Electronic Verification Code (EVC) in cases involving tax audits.
A Digital Signature Certificate (DSC) in cases of non-tax audits.

Benefits of Filing ITR-U

Taxpayers are granted an additional 24 months retrospectively to file their income tax returns, even after the original, belated, and revised ITR deadlines have lapsed.
Reporting undeclared income allows taxpayers to mitigate the risk of receiving tax notices and facing legal consequences.

Conclusion

Filing an ITR-U provides taxpayers with a valuable opportunity to amend prior tax return errors. Adhering to the outlined procedures and timelines can help avoid penalties, allow for better compliance with tax obligations, and significantly reduce legal risks.