The Union Budget for 2025 was presented in the Parliament on February 1. The Finance Minister announced a slew of changes related to taxation. The changes announced are aimed at providing relief to taxpayers and increasing compliance with tax norms.
As a part of her budget speech, the Finance Minister also proposed that the time-limit to file updated returns for any assessment year has been extended to 4 years.
“It is proposed to extend the time limit to file updated returns for any assessment year, from the current limit of 2 years to 4 years,” Sitharaman said.
Sitharaman also said that the government introduced the facility in 2022 and the government’s trust in taxpayers was proven right as nearly 90 lakh taxpayers voluntarily used the facility and paid the additional tax due.
“The Government brought the Updated return facility in 2022 for voluntary compliance by taxpayers who had omitted to report their correct income. The Government's trust in taxpayers was proved right. Nearly 90 lakh taxpayers voluntarily updated their incomes by paying additional tax,” Sitharaman said.
Presently taxpayers can file updated returns for up to two years. Notably, the facility to file updated returns was introduced in 2022. Taxpayers can use the facility to voluntarily correct any mistakes or omissions in the original or belated return. By correcting their mistakes taxpayers can avoid any potential penalties or litigation.
The option to file Updated Returns was introduced under Section 139(8A) of the Income Tax Act.
To use the Updated Return facility, taxpayers need to fill out all the tax-related details in a specified form called ‘ITR Form U’. Additionally, taxpayers will also need to specify the reason behind filing their updated return. Some common reasons for filing the ITR Form U include missing the due date, wrongly filed income, errors in figures of income and other such errors.
While the facility is available, taxpayers must know that the facility cannot be misused to show lower income or set off losses against gains. Additionally, the facility is not available to taxpayers whose accounts are currently under the purview of a search, survey or assessment.
