Form ITR-U: Updated Return U/s 139(8A) Income Tax Act, 1961

The Finance Act 2022, has inserted subsection (8A) in section 139 to enable the filing of an updated return, that allows you to rectifying errors or omissions and update your previous ITR. It can be filed within two years from the end of the relevant assessment year. 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 an Updated ITR (ITR U)

ITR-U is a form that allows taxpayers to correct errors or omissions on their ITRs up to two years from the end of the relevant assessment year to update their return. The ITR-U form is a rescue for those who have not filed their ITR or made inaccurate and false entries while filing their income tax returns. Section 139(8A) under the Income Tax Act allows you a chance to update your ITR within two years i.e. 24 months from the end of the relevant assessment year.

Prescribed Date to file Form ITR-U

An updated return can be filed at any time within 24 months from the end of the relevant assessment year. For instance, for AY 2023-24, you missed the revised/ belated return filing window, you can file an ITR-U after the end of the assessment year, i.e. 31 March 2024 but within two years from there, i.e. 31 March 2026. 

For Example :

Who is eligible to file Form ITR-U

Any person who has made an error or omitted certain income details in any of the following returns is eligible to file an updated return:

• Original return of income, or 
• Belated return, or 
• Revised return

An Updated Return can be filed in the following cases:

• Did not file the return. Missed return filing deadline and the belated return deadline : In the case of Previously Return Not Filed, taxpayers can file an Updated Return to report their income and fulfill their tax obligations.
  
  
• Income is not declared correctly : In these situations where income was not declared correctly, taxpayers can file an Updated Return to rectify the error and provide accurate income details.
  
  
• Choose wrong head of income : When wrong heads of income are chosen, taxpayers can use ITR-U to correct the classification and allocate income under the appropriate heads.
  
  
• Paid tax at the wrong rate : When an incorrect rate of tax has been applied, taxpayers can use ITR-U to correct the rate and ensure accurate calculation of their tax liability.
  
  
• To reduce the carried forward loss : In situations involving the reduction of carried forward loss, taxpayers can file an Updated Return to adjust and reduce the carried forward loss accordingly.
  
  
• To reduce the unabsorbed depreciation : When there is a need for the reduction of unabsorbed depreciation, taxpayers can file an Updated Return to adjust and reduce the unabsorbed depreciation.
  
  
• To reduce the tax credit u/s 115JB/115JC : In situations involving the reduction of tax credit under Sections 115JB/115JC, taxpayers can file an Updated Return to reduce the tax credit accordingly.

A taxpayer can file only one updated return for each assessment year (AY).

Situations when an updated return of income cannot be furnished

An updated return cannot be filed in the following three situations:

Situation 1

An updated return cannot be filed -

a) If an updated return is a return of loss: An updated return cannot be filed if it reflects total income as a loss. However, there is no prohibition on filing an updated return if there is a loss under any head of income but the total income is positive. 

For example, Mr. Amit filed his return of income for the Assessment Year 2022-23 declaring a total income of Rs. 20 lakhs. Subsequently, he noticed that he had failed to disclose in his return of income a short-term capital gain of Rs. 4 lakhs arising from the transfer of listed equity shares under section 111A. In the same year, he also suffered a long-term capital loss of Rs. 20 lakhs from the transfer of immovable property.

In this case, Mr. Amit would be required to carry forward the long-term capital loss from the transfer of immovable property because it cannot be adjusted from the other incomes that Mr. Amit has. But due to this fact, he won't be restricted from filing an updated return because ultimately his total income (after including short-term capital gain from the transfer of listed equity shares) would be positive, i.e., Rs. 24 lakh. 

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) If a search is initiated against the assessee: An updated return cannot be filed for the assessment year relevant to the previous year in which a search is initiated under section 132 and for any assessment year preceding such assessment year. 

For example, if a search was initiated on 01-06-2023, the updated return cannot be filed for the assessment year 2024-25 and any year preceding such assessment year. 

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

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.

Payment of Additional Tax

As mentioned above, to provide an opportunity for taxpayers to correct errors incurred in the ITR & Annual Information Statement (AIS), Finance Minister proposed a new provision called updated return. It is permitting taxpayers to file an updated return on payment of additional tax.

An additional 25 percent on the due tax and interest would have to be paid if the updated ITR is filed within 12 months, while the rate will go up to 50 percent if it is filed after 12 months, but before 24 months from the end of relevant Assessment Year.

• Taxpayers looking to file the same for fiscal 2020-21 will need to pay the due tax and interest along with an additional 50 percent amount of such tax and interest.
• For those looking to file for FY 2021-22, the additional amount will be 25 percent of the due tax and interest.

Also, if a taxpayer files an updated return and does not pay the additional taxes then the return would be rendered invalid.

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. Akash had reported the following income or loss in the income-tax return filed for the following assessment years:

Mr. Akash 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 subsequent year (i.e., AY 2021-22), Mr. Akash 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 under:

Tax payable on filing of 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, fee, and additional income tax on updated returns. 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.

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 an updated return.

(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) or Tax collected at source (TCS)
• Relief under section 89
• Foreign tax credit and 
• MAT or AMT credit 

(b) Interest under section 234A - At the time of furnishing the updated return, the interest under section 234A shall be computed on the self-assessment tax payable on the 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 the updated return.

(c) Interest under section 234B - An assessee may be liable to pay interest under Section 234B at the time of filing of updated return on the amount of assessed tax (total tax less TDS/TCS/relief/credit) declared in the updated return for the period starting from April 1 of the relevant assessment year and ending on the date on which assessed tax is paid before filing of updated return.  

Where the taxes are paid in parts before the filing of the updated return, the interest shall be computed for the broken period considering the taxes paid in each part. However, this interest shall not be charged on the amount of additional income tax payable on the updated return.

(d) Interest under section 234C - Section 234C provides for a levy of interest at the rate of 1% per month in case of a shortfall in payment of advance tax instalments. The amount of shortfall is computed with reference to the "tax due on the returned income".

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 the updated return is to be considered as returned income.

(e) Fee under section 234F - Where a person files a return of income after the due date of filing the original return, he is liable to pay a fee under Section 234F. 

(f) 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.

2. 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 return, 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 - A person shall not be required to pay interest under section 234A at the time of furnishing of updated return if he has already filed the original, revised, or belated return for the relevant assessment year.

(c) Interest under section 234B - Where a person has already filed the original, belated, or revised return for the relevant assessment year and subsequently files an updated return, Section 140B provides that interest under Section 234B at the time of furnishing of updated return shall be computed on the amount of assessed tax.  

An assessee may be liable to pay interest under Section 234B at the time of filing of updated return for the period starting from April 1 of the relevant assessment year and ending on the date on which assessed tax (including self-assessment tax) is paid before filing of updated return.  Where the taxes are paid in parts before the filing of the updated return, the interest shall be computed for the broken period considering the taxes paid in each part.

However, this interest shall not be charged on the amount of additional income tax payable under section 140B. It is to be noted that the amount of interest shall be reduced by the amount of interest paid in an earlier return.

(d) Interest under section 234C - Interest under section 234C shall be computed after taking into account the income furnished in the updated return as the returned income. It is to be noted that the amount of interest computed shall be reduced by the amount of interest paid in an earlier return.

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

(f) 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. 

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