The new updated return proposal comes with many twists and fine print. The facility of filing an updated return is mainly applicable when you have an additional income.
Finance Minister Nirmala Sitharaman, while announcing her paperless Budget for the next financial year 2022-23, introduced a facility for the taxpayers to update their income tax returns (ITR) within two years from the end of the relevant assessment year.
This comes as an opportunity for taxpayers to voluntarily disclose their income which was either under-reported or not reported. The rationale is to avoid the lengthy process of adjudication and repose trust in the taxpayers.
The facility can be used by the taxpayers when they file ITR for FY2022-23.
What You Can’t Include In The Updated ITR
When you are filing your updated return, there are certain details which you cannot present to the income tax department. “It is important to note that an updated tax return can be filed only to disclose additional income that was either omitted in a tax return filed earlier or where taxable income is discovered in case no tax return was filed earlier,” says Akhil Chandra , partner, Grant Thornton Bharat.
The facility of filing an updated return shall not be applicable in a few cases.
This is not relevant when you’ve made a loss in something or in case of your liability.
If you have already filed your updated return once, you cannot do that again.
You would also not be able to file an updated return in case of an ongoing search, survey, specified notice, or after the completion of assessment.
Further, an updated tax return can be filed only on payment of the tax, interest, fee, and additional tax due on the income being offered to tax in such updated tax return. “An additional tax has been introduced for availing the benefit of filing updated tax return, where the additional tax could be 25 per cent or 50 per cent of the tax and interest determined on the income or additional income being offered to tax,” adds Chandra. The mechanism for calculating the tax, interest and additional tax has been provided and taxpayers will need to meticulously calculate the same to understand the actual outflow.
Note that this facility is different from revised ITR (read more here). Experts say while the new provisions appear cumbersome, it is an affirmative step to encourage voluntary compliance and avoid prolonged litigation