India Notifies New Form for Taxpayers Filing Updated Tax Returns

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India’s income tax (IT) department has notified a new form, ITR-U (see the income tax website here), for taxpayers filing their updated tax returns. The move seeks to reduce lengthy adjudication timelines and use of resources for improper tax filing and is based on the self-assessment of taxpayers.

What is the new ITR form?

In the new form, ITR-U, the taxpayer will need to provide the exact reason for filing the updated income tax return (ITR) and the amount of income liable to tax. However, they will not be required to provide a break-up of that income.

When would taxpayers need to file ITR-U?

Some of the reasons for filing the updated tax return include incorrect reporting of income, reduction of carried forward loss, choosing the wrong heads of income, reduction of unabsorbed depreciation, reduction of tax credit under Section 115JB/115JC, wrong rate of tax when filing the original ITR, etc.

What is the period during which ITR-U can be filed?

ITR-U will be available for filing updated tax returns for FY 2019-20 and FY 2020-21.

ITR-U can be filed within two years of the end of the relevant assessment year – a convenience introduced in the Budget 2022-23 subject to payment of additional taxes owed. This measure seeks to eliminate discrepancies or omissions on the part of taxpayers.

How many times can a taxpayer update their income tax return in an assessment year?

Taxpayers will be allowed to file only one such correction (updated return) per assessment year.

How much are taxpayers expected to pay when filing their updated tax return?

Filing an updated tax return will trigger payment of an additional 25 percent on the due tax and interest if the updated ITR is filed within 12 months. This rate will increase to 50 percent if the ITR-U is filed after 12 months, but before 24 months from the end of the relevant assessment year. 

If a taxpayer files an updated return but does not pay the additional taxes, the return will be considered invalid. 

Under what circumstances is ITR-U unavailable to the taxpayer?

If a prosecution proceeding is initiated by issuing notice for a particular assessment year, the taxpayer cannot file ITR-U for that particular year. 

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