Introduction

An updated return is a return of income that can be filed by a taxpayer within 24 months from the end of the relevant assessment year, even if he has not previously filed a return for that year. An amount equal to 25% or 50% as additional tax is required to be paid with such updated return. [Section 139(8A), Section 140B, Rule 12AC]

 

What is an updated return?

An updated return is a type of tax return that allows taxpayers to file their returns with more time. It is intended to encourage voluntary tax compliance.

An updated return can be filed by any person, except in certain circumstances, regardless of whether they have previously filed an original, belated, or revised return for the relevant assessment year.

The filing of an updated return is optional for the taxpayer.

 

When can an updated return be filed?

Eligibility for Filing ITR-U: You can file ITR-U if you made errors or omitted income details in any of the following returns:

• Original return of income
• Belated return
• Revised return

Common scenarios for filing ITR-U include:

1. Not filing the return initially
2. Missing the return filing deadline
3. Incorrectly declaring income
4. Choosing the wrong head of income
5. Paying tax at the wrong rate
6. Adjusting carried-forward losses or unabsorbed depreciation
7. Managing tax credits under sections 115JB and 115JC

A person can file an updated return even if he has furnished a return of loss under section 139(3) earlier for the relevant assessment year, but the updated return should not be a return of loss.

 

When can an updated return cannot be filed?

1. If an updated return is a return of loss
2. If an updated return results in lower tax liability
3. If an updated return results in an increase in the refund
4. If a search is initiated against the assessee under section 132
5. If books of account, other documents or any assets are requisitioned under section 132A
6. If a survey conducted against the assessee under section 133A
7. If documents or assets are seized or requisitioned in case of any other person belonging to the Assessee
8. If the updated return has already been filed,
9. If the assessment is pending or completed,
10. If AO has information about the assessee under specified Acts [Prevention of Money Laundering Act, 2002; The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; The Prohibition of Benami Property Transactions Act, 1988; or The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.],
11. If AO has information about the assessee under DTAA or TIEA
12. If any prosecution proceeding is initiated
13. In other notified cases

 

The time limit for filing an updated return

The provision of updated returns is effective from April 1, 2022, and the time limit provided for filing an updated return is 24 months from the end of the relevant assessment year.

In the financial year 2023–24, a person can file an updated return for AY 2021–22 and AY 2022–23.

 

Manner of furnishing of an updated return

An updated return shall be filed electronically under Digital Signature Certificate (DSC) in case of the following taxpayers:

(a) Company

(b) Political Party

(c) Any person whose accounts are required to be audited under Section 44AB of the Income-tax Act, except those filing return in ITR7.

For other taxpayers, the updated return shall be filed electronically, either under Digital Signature Certificate or under Electronic Verification Code (EVC).

 

Reporting in ITR while filing an updated return

When a person is filing an updated return, he is required to provide certain details in the relevant ITR forms. These forms include Schedule ‘Part A Gen_139(8A)’ and ‘Part B ATI’. The details that need to be provided include:

1. Basic details, i.e. PAN, Name, and Aadhaar Number
2. Details of earlier return, if filed, i.e. section, ITR form, acknowledgment number, and date of filing of the previous return
3. Eligibility of filing an updated return
4. Relevant ITR form selected for updated return
5. Reasons for filing the updated return
6. Time of filing of updated return: The person needs to specify whether the updated return is being filed within 12 months or between 12 and 24 months from the end of the assessment year.
7. Whether filing an updated return result in a reduction of carried-forward loss, unabsorbed depreciation, or tax credit? If yes, then the person needs to select the affected assessment years and whether the revised or updated return is filed for such years.
8. Head-wise reporting of additional income as shown in the updated return and computation of tax payable on the updated return
9. Details of tax payments on updated return
10. Details of advance tax, self-assessment tax, and regular assessment tax paid, the credit of which has not been claimed in the earlier return
11. Relief under section 89, which was not claimed in the earlier return,

 

Curative Updated Return of Subsequent Years

When a person files an updated return for a previous year, and as a result, the amount of the following is reduced for any subsequent year, the person shall be required to file an updated return for each subsequent year:

carried forward losses, or

carried forward unabsorbed depreciation; or

MAT Credit; or

AMT Credit

This is to ensure that the correct amount of losses are carried forward and can be used to offset future income.

For Example, Mr. A had reported the following income or loss in the income-tax return filed for the following assessment years:

Particulars	AY 2021-22	AY 2020-21	AY 2019-20
Income (or loss) under the head Business or	80,00,000	10,00,000	20,00,000
Less: Set-off of loss (AY 2019–20)	(10,00,000)	(10,00,000)	(10,00,000)
Total Income	70,00,000
Loss carried forward for adjustment in subsequent years		10,00,000	20,00,000

Mr. A filed an updated return for Assessment Year 2020-21, declaring the additional business income of Rs. 25,00,000.

He set off the entire loss of AY 2019–20 (Rs. 20,00,000) against the business income reported in such an updated return. As declaring additional income in the updated return for AY 2020-21 results in the reduction of loss carried forward to the subsequent year (i.e., AY 2021-22), Mr. A shall be required to furnish an updated return for AY 2021-22 as well.

The revised computation of income or loss in updated returns shall be as follows:

Particulars	Updated Return AY 2020-21	Updated Return   AY 2021-22
Income (or loss) under the head Business or Profession disclosed in earlier return	80,00,000	10,00,000
Additional business income disclosed in the updated return	–	25,00,000
Less: Set-off of loss (AY 2019–20)	–	-20,00,000
Total Income	80,00,000	15,00,000
Loss carried forward for adjustment in subsequent years	–	–

Tax payable on filing the updated return shall be paid along with interest for default or deferment in payment of advance tax and additional tax.

Tax on updated return

The provisions of section 140B provide for payment and computation of tax, interest, fees, and additional income tax on updated returns. The updated return shall be accompanied by proof of tax payment, i.e., normal tax (if any), additional tax, interest, and fee as required under section 140B; otherwise it shall be treated as a defective return.

Computation of tax, interest, and fee on the updated return where no return was filed earlier

Where a person has not filed the original or belated return for the relevant assessment year, the tax payable on the updated return (self-assessment tax) shall be paid along with interest and fee for delay in furnishing the return of income and interest for any default or delay in payment of advance tax. Further, an additional income tax shall be paid before filing an updated return.

(a) Self-assessment tax: The Self-assessment tax on income reported in updated return shall be computed after taking into account the following:

1. a) Advance tax;
2. b) Tax deducted at source (TDS) or Tax collected at source (TCS);
3. c) Relief under section 89;
4. d) Foreign tax credit; and
5. e) MAT or AMT credit

(b) Interest under section 234A

(c) Interest under section 234B

(d) Interest under section 234C

(e) Fee under section 234F

(f) Additional tax on updated return

Computation of tax, interest, and fee on the updated return where a return was filed earlier

Where a person has already filed the original, belated, or revised return for the relevant assessment year, the tax payable on the updated return (self-assessment tax) shall be paid along with interest for any default or delay in payment of advance tax as reduced by the amount of interest paid in an earlier return. Further, an additional income tax shall be paid before filing an updated return.

(a) Self-assessment tax: The self-assessment tax shall be computed after taking into account the following:

• Tax or relief, the credit of which has already been taken in earlier return; and
• Tax or relief, the credit of which has not been claimed in an earlier return.

Further, the amount of tax so computed shall be increased by the amount of refund, if any, issued in respect of such an earlier return.

(b) Interest under section 234A

(c) Interest under section 234B

(d) Interest under section 234C

(e) Fee under section 234F

(f) Additional tax on updated return

 

Additional tax on updated return 

The additional tax shall be equal to 25% of the aggregate of tax and interest payable by a person on the filing of the updated return where such return is furnished after the expiry of the due date of filing of belated or revised return but before completion of a period of 12 months from the end of the relevant assessment year.

Where the updated return is furnished after the expiry of 12 months from the end of the relevant assessment year but before completion of the period of 24 months from the end of the relevant assessment year, the additional tax payable shall be 50% of the aggregate of tax and interest payable.

Here it is to be noted that for computation of “additional income-tax”, tax shall include surcharge and cess. Further, for the computation of additional tax, the amount of interest payable shall be reduced by the amount of interest paid in accordance with the earlier return.

 

 

 

MCQs on updated return

Q1. An updated return shall be filed electronically under Digital Signature Certificate (DSC), where the taxpayer is ________.
(a) A company
(b) A political Party
(c) Both (a) and (b)
(d) Any person without any condition
Correct answer: (c)
Justification for correct answer: An updated return shall be filed electronically under Digital Signature Certificate (DSC) in case of the following taxpayers: (a) Company (b) Political Party (c) Any person whose accounts are required to be audited under Section 44AB of the Incometax Act except person filing return in ITR-7.
Q2. When an updated return cannot be filed?
(a) If an updated return results in or increase in the refund
(b) If a search is initiated against the assessee
(c) If a survey conducted against the assessee
(d) All of the above
Correct Answer: (d)
Justification for correct answer: An updated return can be filed by any person, except in certain circumstances, regardless of whether they have previously filed an original, belated, or revised return for the relevant assessment year. The circumstances covered under options (a), (b), and (c) are specified in the exception for filing an updated return.
Q3. Can an updated return be revised for any particular assessment year?
(a) Yes
(b) No
(c) Within a certain time limit
(d) If AO allowed
Correct Answer: (b)
Justification for correct answer: An updated return cannot be revised as it can be filed only once for any particular assessment year.
Q4. A person needs to file the updated return for each subsequent year, where the amount of the ________ is reduced for any subsequent year while filing the updated return for the previous year.
(a) Carried forward losses
(b) MAT or AMT credit
(c) Carried forward unabsorbed depreciation
(d) All of the above
Correct Answer: (d)
Justification for correct answer: When a person files an updated return for a previous year, and as a result, the amount of the following is reduced for any subsequent year, the person shall be required to file an updated return for each subsequent year:
 Carried Forward Losses; or
 Carried Forward Unabsorbed Depreciation; or
 MAT Credit; or
 AMT Credit.
Q5. In the case of the updated return, the assessment under section 143 or section 144 can be made at any time before the expiry of ________ from the end of the financial year in which the updated return is furnished.
(a) 12 months
(b) 9 months
(c) 21 months
(d) 18 months
Correct Answer: (b)
Justification for correct answer: In the case of the updated return, the assessment under section 143 or section 144 can be made at any time before the expiry of 9 months from the end of the financial year in which the updated return is furnished.
Q6. What is the amount of additional tax where an updated return is filed within 12 months
from the end of the relevant assessment year?
(a) 25% of the aggregate of tax and interest payable
(b) 50% of the aggregate of tax and interest payable
(c) 100% of the aggregate of tax and interest payable
(d) None of the above
Correct Answer: (a)
Justification for correct answer: The additional tax shall be equal to 25% of the aggregate of tax and interest payable by a person on the filing of the updated return where such return is furnished after the expiry of the due date of filing of belated or revised return but before completion of a period of 12 months from the end of the relevant assessment year.

Comment on incorrect answer: Where the updated return is furnished after the expiry of 12 months from the end of the relevant assessment year but before completion of the period of 24 months from the end of the relevant assessment year, the additional tax payable shall be 50% of the aggregate of tax and interest payable. Therefore, option (b) is incorrect.