Don’t miss the final window to file your ITR, or correct it

As of July 31, over 677 crore individual tax returns were filed for the assessment year (AY) 2023-24. As of November 30, 1,176 crore individual users were registered with the I-T department’s return filing portal. These numbers tell that many taxpayers are yet to file their returns. 

They may have forgotten to do so. Beyond this, there are others who, despite filing their returns in time, may have failed to disclose all their taxable incomes, wrongly disclosed certain incomes or found past incomes which may have been left out in their earlier year’s returns. For all these people the government has given a window to set things right.

Belated return

Earlier the taxpayers had the option of late filing their returns by March 31 of the following calendar year or before the completion of the assessment, whichever was earlier. However, the Union Budget of 2021-22 pulled back that deadline to December 31 or within the calendar year. As, now, the return, having missed the original deadline, is being filed three months ahead of the end of the assessment year, it is called belated.

But there is a price to pay for failing to file the return in time. The belated return will have a 1 per cent interest applicable on taxes due per month. This apart, those taxpayers with less than Rs 5 lakh annual income will pay a late fee of Rs 1,000 and those with annual income above Rs 5 lakh during 2022-23 will pay Rs 5,000. As for wilful defaulters the punitive measures could involve imprisonment for 3 months-7 years, plus a fine.

Revised return

Subject to certain conditions, a taxpayer can revise the returns filed earlier. You get the opportunity to correct inaccuracies in reported income, deductions, bank details, personal information, omission of certain income (subsequently realised), failure to avail carry forward of losses of earlier years, mismatch of income between the original return and Form 26AS/Annual Information Statement. This too should be done by December 31. As far as interest is concerned, only the revision of income attracts as such. There will be no further penalty for filing as such. However, if the assessing officer discovers that the error was intentional/fraudulent, he may disallow and levy a hefty penalty.

Updated Return

To increase voluntary compliances, avoid penal consequences and protracted tax litigation, the central government introduced a new concept called ‘updated return’ in its Union Budget 2022-23 with a specified timeline, additional tax, interest, and penalty. A taxpayer who has filed either his/her Return – including original, belated, revised or not filed at all – for an AY now has the option to file an updated return within 24 months from the end of the relevant AY provided it results in an additional payment of tax to the exchequer. Interestingly, the same cannot be availed to claim a refund of tax, to file a return of loss, having the effect of reduced total tax liability. 

An updated return can be filed by all types of taxpayers, say, individuals, Hindu Undivided Family (HUF), partnership firms, companies, association of persona, body of individuals, who failed to file the return in time, to report an income correction, correct the wrong heads of the income and also report reduction of carried forward loss, unabsorbed depreciation, reduction of the tax credit, wrong rate of tax and others. Taxpayers subject to income tax search/survey are not entitled to this option. 

A taxpayer is eligible to file only one updated return per AY. For the AY 2021-22 (FY 2020-21), an updated return in Form ITR U has to be filed by on or before March 31, 2024. However, timely remittance of advance tax and credit of TDS/TCS would minimise the rigour of additional tax largely. Similarly, filing the original return within the due date will ensure a reduced interest outgo under two provisions.