All About Newly Introduced “Updated Income Tax Return”

All About Newly Introduced “Updated Income Tax Return”

Executive Summary:

This article describes:

• • • This article includes all detailed information about newly introduced Updated Return under Income Tax Act.
    • Further this article also throws light on the difference between Revised Return and Updated Return.

Introduction:

The Government of India has introduced the new provisions to file updated returns where asses see will be able to correct their income tax returns. This return, as the name implies, allows taxpayers to amend any omissions or errors in their income tax returns that they find after the time restriction for filing the revised return has passed. It’s worth noting that you can file an updated return even if you didn’t file the original return, which is an improvement over the revised return approach.

New amendment in the act:

In the Budget 2022, Finance Minister included a new Section 140B in the Income Tax Act for the tax to be paid to file a return under the proposed requirements, i.e. Section 139(8A) of Income Tax Act. According to this new provision, a taxpayer may file an ‘Updated Return’ to file a pending return or to remedy Omissions and Errors noted in the Original Return. The Updated Return must be filed within two years from the end of the relevant assessment year.

What is an Updated Return?

The Finance Minister has proposed a new clause that will allow taxpayers to file ‘updated’ returns within two years after the end of the relevant assessment year to address omissions and inaccuracies in their initial tax returns. This idea permits taxpayers to avoid the time-consuming processes associated with assessing and taxing income that has not been disclosed or assessed. The purpose of this newly adopted updated return is to enable the taxpayer a reasonable amount of time to complete a correct statement of his income within the time frame specified by the Income Tax Act.

Applicability of an Updated Return:

One can only file an updated return if it results in the assessment of increased tax liability; if the updated return decreases your tax outgo or results in a return of loss, you cannot file it. In essence, a modified return cannot result in a reduction of the income declared in your original or revised return. Apart from that, taxpayers who have been the subject of a search under Section 132 or 133A or who have received a notice cannot file an updated return.

Need of an Updated Return:

Individual assesses, companies/auditable cases, and assesses who engage in an overseas transaction or a specific domestic transaction within a fiscal year have an additional 5 months to file a belated or updated report under present laws. When we consider the vast amounts of information and data available, as well as the “nudge approach” that motivates taxpayers toward the desired goal of voluntary tax compliance, beginning with the filing of correct tax returns, this additional timeline for filing a revised/belated return may not be sufficient.

What distinguishes an updated return from a revised return?

It’s clear that there is a difference between revised return and updated return. Taxpayers can edit their returns under the term called revised return in Income Tax Act, although an updated return differs from a revised return in the following ways:

• One can file an updated return even if you haven’t filed your initial return, but you can’t file a revised return without filing the original.
• Only if there is an additional tax burden then updated return to be filed, but a revised return has no such requirements.
• Within two years of the end of the relevant assessment year, an updated return can be filed, whereas a revised return must be filed within three months of the end of the relevant assessment year.
• A revised return has no penalties, but an updated return has a penalty of 25-50 percent of the tax liability.

Conclusion:

The updated return will provide the government with additional tax revenue. The updated return will generate greater tax income for the government. It will save a taxpayer not only from proceedings, but also from any subsequent sorts of litigation. The government’s plan to eliminate tax evasion will get a jump start due to the Updated Return. If a taxpayer misses the deadline for filing a belated or revised return, the new procedure for filing an updated return can assist them in coming clean. The goal of implementing this capability is to encourage voluntary tax compliance and limit the number of lawsuits.

Regards,
Legal Team

Proind Business Solutions Private Limited
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