Time is running out for taxpayers who need to correct any errors or omissions in their income tax returns for the last two financial years. March 31, 2025, is the final deadline for filing updated returns for the financial year 2021-22. This deadline is important for those individuals who might have;
- Overlooked any income
- Misreported their earnings
- Made mistakes in their previous filing, etc.
This could be your last chance to set things right, on record, before the window closes. The 2025 budget also introduced a change in updated return filings.
Before we get down to this, let’s understand, what are ‘Updated Returns’.
The concept of updated returns was introduced by the Ministry of Finance in the Finance Act 2022. The tax filings can be corrected within two years from the end of the relevant assessment year. The idea here is to first reduce legal disputes and second to promote voluntary compliance from taxpayers.
Instead of waiting for the tax department to detect discrepancies and initiate proceedings, individual taxpayers and businesses now have an opportunity to correct their filings proactively.
For example, if you need to update your return for the assessment year 2022-23 (corresponding to FY 2021-22), you must do so before March 31, 2025.
Missing out on this deadline means letting go of your chance to correct any errors voluntarily, which may later mean penalties and legal trouble for you in case any discrepancies are detected by the tax authorities.
What is new in the Budget 2025?
Initially, taxpayers had just two years to file updated returns. However, in the Union Budget 2025, the government extended this period to 48 months.
For taxpayers, this means that discrepancies in ITRs for FY 2021-22 and FY 2022-23 can still be fixed within this extended time frame, but only if you take action before the respective deadline (March 31).
What Should You Keep In Mind?
Though this extended timeline brings relief to certain taxpayers, they must also note certain conditions attached to it. For instance, filing an updated return means you might have to pay additional taxes, as required under the new rules. The idea is to ensure this option is used by taxpayers who seek genuine corrections and not to gain undue benefits.
Here is what you should know;
Taxpayers cannot file updated returns if they result in a tax refund or a lower tax liability. For anybody hoping to reduce their tax burden, the updated return option won't work for you.
Some taxpayers may not be eligible to file updated returns if they are under investigation by the authorities or have undergone a tax survey. Also, you would not be able to use this service if your documents have been seized by the I-T department.
The updated ITR is a chance for some taxpayers to remain compliant with tax updates and avoid unnecessary legal troubles. With the deadline approaching fast, you can also consult a tax expert/professional to help you navigate the process smoothly.
