Updated Return (ITR-U) – All you want to know before filing past 3 year Missed income Tax Returns

Updated Return is a return, which is introduced in Budget 2022 to file missed Income Tax Return of past 3 years, The form is ITR-U

But there are lots of conditions applicable with Updated Return, which i am discussing in this article

Know about Income tax Rules Related to Updated Return:

The Finance Act 2022, has inserted subsection (8A) in section 139 to enable the filing of an updated return. The section provides that an updated return can be filed by any person irrespective of the fact whether such person has already filed the original, belated or revised return for the relevant assessment year or not.

What is Due Date or Last Date to file Updated Return:

An updated return can be filed at any time within 24 months from the end of the relevant assessment year. Example for FY 2023-24, Relevant AY is 2024-25 and Updated ITR can be filled for FY 2022-23 till 31st March 2027

Who cannot file Updated return (ITR-U)?

Situation 1: An updated return cannot be filed if such updated return:

a) is a return of a loss; or

b) results in lower tax liability determined on the basis of original, revised or belated return filed by assessee; or

c) results in or increasing the refund due on the basis of original, revised or belated return filed by assessee.

Situation 2: A person cannot file updated return wherein:

a) A search has been initiated under section 132 or books of account or other documents or any assets are requisitioned under section 132A in the case of such person; or

b) A survey has been conducted under section 133A, other than section 133A(2A), in the case such person; or

c) A notice has been issued to the effect that any money, bullion, jewellery or valuable article or thing, seized or requisitioned under section 132 or section 132A in the case of any other person belongs to such person; or

d) A notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 132 or section 132A in the case of any other person, pertain or pertains to, or any other information contained therein, relate to, such person.

In this situation, an updated return cannot be filed for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and any assessment year preceding such assessment year.

Situation 3: An updated return cannot be filed for the relevant assessment year wherein:

a) An updated return has been furnished by him for the relevant assessment year;

b) Any proceeding for assessment or reassessment or recomputation or revision of income is pending or has been completed;

c) The Assessing Officer has information in respect of such person under: 

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976; 

The Prohibition of Benami Property Transactions Act, 1988;  The Prevention of Money-laundering Act, 2002; or 

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. And the same has been communicated to him, prior to the date of furnishing of updated return

d) Information has been received under an agreement referred to in section 90 or section 90A in respect of such person and the same has been communicated to him, prior to the date of furnishing of return of updated return;

e) Any prosecution proceedings have been initiated in respect of such person, prior to the date of furnishing of updated return.

f) Assessee is such person or belongs to such class of persons, as may be notified by the Board.

in short updated return cannot be filed:

• if an updated return is a return of a loss;
• In case an updated return results in lower tax liability;
• In case an updated return results in or increasing the refund;
• In case of a search initiated against the assessee;
• Where books of account or assets etc. are requisitioned in case of the assessee;
• In case survey conducted against the assessee;
• Where documents or assets seized or requisitioned in case of any other person belong to the assessee;
• In case an updated return has already been filed;
• In case assessment is pending or completed;
• In case AO has information about the assessee under specified Acts;
• In case AO has information about the assessee under DTAA or TIEA;
• In case any prosecution proceeding is initiated; or
• In case of a person or class of persons as notified by the CBDT.

Important:

1. Where a person has furnished a return of loss under section 139(3), he can furnish an updated return. However, such an updated return should be a return of income. In other words, the updated return should not be a return of loss.

2. If as a result of furnishing of an updated return for a previous year, the following is reduced for any subsequent year, then the person shall be required to file the updated return for each such subsequent year: 

loss or any part thereof carried forward under Chapter VI; or 

unabsorbed depreciation carried forward under Section 32(2); or 

tax credit carried forward under Section 115JAA; or 

tax credit carried forward under Section 115JD.

Is there any fee or penalty levied upon taxpayer furnishing updated return?

Yes, As i earlier said this return had lots of conditions so it is having extra Fee too.

Section 140B provides for payment and computation of tax, interest, fee, and additional income-tax on updated return. It contains the following six provisions:

(a) Computation of tax on the updated return where no original or belated return was filed.

(b) Computation of tax on the updated return where original, revised or belated earlier (‘earlier return’) was filed.

(c) Computation of additional tax payable at the time of furnishing of updated return.

This provision also contains an explanation that provides for computation of interest under section 234A, section 234C and interest on additional tax payable at the time of furnishing of updated return.

1. 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 of an updated return. Such tax, interest, fee, and additional income tax shall be computed in the following manner:

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

Advance tax; 

Tax deducted at source (TDS); 

Tax collected at source (TCS); 

Relief under section 89; 

Foreign tax credit; and 

MAT or AMT credit.

(b) Interest under Section 234A for late filing of return

At the time of furnishing of updated return, the interest under section 234A shall be computed on the self-assessment tax payable on updated return. The interest shall be charged for the period commencing from the date immediately following the due date for filing the original return of income and ending with the date on which the updated return is furnished. However, this interest shall not be charged on the amount of additional income-tax payable on updated return.

(c) Interest under section 234C for default in payment of advance tax instalments Section 234C interest is computed with reference to ‘tax due on the returned income’.

Thus, in the case of an updated return, the total income reported in updated return is to be considered as returned income. Total income reported in updated return shall be treated as returned income even in cases where the assessee has already filed an original, belated or revised return for the relevant assessment year before filing the updated return.

(d) Fee under section 234F for default in furnishing return The fee for default in furnishing of return shall be levied as per the extant provisions on furnishing of belated return

2. Computation of tax, interest and fee on 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, then 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 also be required to be paid before filing of updated return. The tax, interest and additional income tax that is required to be paid before filing of updated return shall be computed in the following manner:

(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  T

ax or relief, the credit of which has not been claimed in 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 234B for delay in payment of advance tax Where a person has already filed return of income, interest payable under section 234B at the time of furnishing of updated return shall be computed on the amount of assessed tax or on the amount by which the advance tax paid falls short of the assessed tax, as the case may be. The amount of interest computed shall be reduced by the amount of interest paid in an earlier return.

(c) Interest under section 234C for default in payment of advance tax instalments Interest under section 234C shall be computed after taking into account the income furnished in the updated return as the returned income. The amount of interest computed shall be reduced by the amount of interest paid in an earlier return.

(d) Fee under section 234F for default in furnishing return A person shall not be required to pay the fee at the time of furnishing of updated return if he has already filed the original, revised, or belated return for the relevant assessment year.

3. Payment of additional tax on updated return Tax on the updated return shall be paid along with interest, fee, and additional income tax. 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.

4. Proof of payment The updated return shall be accompanied by the 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.

In Short additional tax in accordance with Section 140B:

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.

Further, a fee under Section 234F shall be charged if such a person did not furnish a return of income for that Assessment Year for which he is furnishing an updated return.

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