income tax

Updated Income Tax Return Facility: Key Amendments and Guidelines

Introduction

The Government has implemented an updated return facility under Section 139(8A) of the Income-tax Act, 1961, via the Finance Act, 2022. This initiative is designed to enhance voluntary tax compliance, aligned with the principles of "Sabka Saath, Sabka Vikas, Sabka Vishwas, and Sabka Prayas." Taxpayers who did not report their accurate income can now submit updated returns after paying an additional tax, thereby fostering a culture of trust and accountability within the tax framework.

Proposed Amendments

The Finance Bill, 2025, proposes to extend the time limit for submitting updated returns from two years to four years following the relevant assessment year. This change, effective April 1, 2025, will give taxpayers the opportunity to file updated returns up to four years after the closure of the assessment year. The objective of this amendment is to offer taxpayers increased flexibility for correcting omissions and ensuring compliance, ultimately enhancing revenue collection while promoting transparent governance.

According to the Finance Act, 2022, sub-section (8A) was added to Section 139 of the Income-tax Act, 1961 to facilitate updated returns. This provision encourages voluntary compliance and emphasizes the core principles of "Sabka Saath, Sabka Vikas, Sabka Vishwas, and Sabka Prayas." Taxpayers have actively engaged with this initiative, resulting in a significant number of updated returns being filed to correct previous omissions.

Additional Tax Rates

The revised additional tax structure for the updated returns filed within extended periods is as follows:

  • 25% if filed within 12 months
  • 50% if filed within 12–24 months
  • 60% if filed within 24–36 months
  • 70% if filed within 36–48 months

Restrictions on Filing

Taxpayers are unable to file updated returns if:

  • A notice under Section 148A (reassessment) is issued after 36 months from the assessment year.
  • The return leads to a reduction of loss or an increase in refunds.

Various Nuances

  • Loss Reporting: Updated returns cannot declare a loss or reduce carried-forward losses.
  • One-Time Filing: Only one updated return is allowed per assessment year.
  • Digital Compliance: Updated returns must be filed electronically using DSC/EVC. However, political parties and companies must utilize DSC for submission.

Conclusion

The introduction of amendments to updated return provisions underlines the Government's commitment to improving tax compliance. Taxpayers are encouraged to utilize this opportunity to rectify discrepancies, ensuring a fair and accountable tax environment.