The Finance Bill of 2022 has added a new section to the Income Tax Act,1961 i.e. section 139(8A) which facilitates the filing of Updated Income Tax Returns (hereinafter known as “Updated ITRs”). The same stands effective from 01.04.2022 i.e. the first day of the current financial year.

When an Updated ITR may be filed?

Section 139(8A) of the Income Tax Act, 1961 states that one can file an updated ITR within a period of two years after the expiration of the relevant assessment year.

Thus, one can now file an updated ITR for period from assessment year 2020-21 irrespective of the fact that whether the original ITR was filed by the taxpayer or not.

Requisites of an Updated ITR

With the added benefits that the provision of the updated ITR provides, there are certain requisites that are to be followed to avail of the benefits:

1. There should be an undisclosed or omitted additional income earned during such year and such income may attract tax liability before an updated ITR is to be filed.
2. Another pertinent consideration is that one cannot report a loss for the concerned year to subsequently cause a reduction in the tax liability.
3. The benefit of updated ITR can be sought only once for an assessment year. One cannot file an updated ITR twice for the same assessment year.
4. In case such updated ITR is filed within a period of twelve months after the expiration of the concerned assessment year, then 25% additional income tax with interest is payable.
5. On the other hand, if such an updated ITR is filed after 13 months but before 24 months of the expiration of the concerned assessment year, then 50% additional income tax with interest becomes payable.
6. A proof of such additional income or payment received by the taxpayer should be submitted to  file an updated ITR.

Consequences of non-compliance

The provision of updated ITR, as provided by section 139(8A) of the Income Tax Act, 1961 has escaped several taxpayers from the liability of paying hefty penalties for non-compliance with tax provisions.

It provides the taxpayer an opportunity to disclose earlier omitted or missed income earned during a financial year, and not attract a penalty for its omission.

However, non-compliance with the provision of updated ITR, i.e. non-filing of an earlier omitted or missed income, a penalty of 50% of tax payable may be levied. Further, misreported income at times attracts a penalty of 200% of tax payable.

Conclusion

The newly added provision of updated ITR is a boon for many taxpayers who unintentionally omitted a portion of their income. It can be filed only within a period of two years after the expiration of the period of the relevant assessment year. However, certain conditions must be followed before the filing of an updated ITR. Non-compliance with such conditions attracts a penalty. Therefore, to avoid such a hefty penalty, it is advisable to realize the benefits of updated ITR.