Filing ITR-U for Missed Tax Returns: When and How to Use the Updated Return Option

5 days ago8 min read

Filing income tax returns accurately and on time is crucial for compliance with tax regulations. However, taxpayers often make errors or miss filing deadlines, leading to potential penalties and legal consequences. To address such situations, the government introduced the Income Tax Updated Return (ITR-U) under Section 139(8A) of the Income Tax Act, 1961. This provision allows taxpayers to rectify omissions, report undisclosed income, or correct inaccuracies in their previously filed returns.

With recent amendments extending the filing window, ITR-U provides greater flexibility for taxpayers to stay compliant and avoid unnecessary scrutiny. Understanding when and how to file an updated return is essential for making informed tax decisions and preventing future tax complications.

Overview of ITR-U and Its Purpose

ITR-U is a mechanism designed to help taxpayers regularize their tax filings by offering an opportunity to correct mistakes or omissions from previous income tax returns. Whether due to misreporting income, claiming incorrect deductions, or missing the filing deadline altogether, ITR-U enables taxpayers to voluntarily rectify these issues before facing potential tax notices or penalties.

Key objectives of ITR-U:

Encouraging voluntary compliance by allowing taxpayers to disclose omitted income.
Reducing litigation risks by enabling proactive rectification of tax filings.
Providing an extended time frame to update returns, accommodating those who missed the original deadlines.

Unlike revised or belated returns, which have stricter deadlines, ITR-U offers an extended filing period, ensuring more taxpayers can make necessary corrections without immediate legal repercussions.

Why Taxpayers May Need to File an Updated Return

Taxpayers may need to file ITR-U due to various reasons, including:

Failure to file the original return: Individuals who missed the standard or belated filing deadlines can use ITR-U to comply with tax laws.
Unreported income: Any additional income that was mistakenly left out in the original return, such as capital gains, rental income, or interest income, can be disclosed through ITR-U.
Incorrect income classification: If an individual has misreported income under the wrong head (e.g., showing business income as salary), ITR-U allows for correction.
Omission of tax credits or deductions: Missed claims for TDS (Tax Deducted at Source), advance tax, or deductions under various sections (like 80C, 80D, etc.) can be rectified.
Adjustment of carried-forward losses: If a taxpayer failed to properly report losses that could be carried forward, they might need to update their return.
Compliance with tax notices: If the Income Tax Department has flagged discrepancies in previous filings, taxpayers can proactively correct them before receiving further scrutiny.

When to File ITR-U

Filing an updated return under ITR-U is subject to specific conditions and deadlines. Understanding eligibility and the applicable timeframe ensures taxpayers make the necessary corrections in a timely manner.

Eligibility Criteria for Filing ITR-U

Any taxpayer, whether an individual, firm, or company, can file an updated return if they meet the following conditions:

The taxpayer has previously filed a return and needs to correct errors or omissions.
The taxpayer failed to file a return for a particular financial year but wishes to comply voluntarily.
The return update is being made to correct misreported income, adjust tax credits, or disclose additional income.
The taxpayer is willing to pay the additional tax liability associated with filing ITR-U.

Common Reasons for Updating a Tax Return

ITR-U is primarily used when a taxpayer has:

Underreported or omitted income, leading to incorrect tax calculations.
Incorrectly classified income under the wrong head.
Missed deductions or exemptions, resulting in higher tax liability.
Failed to file the original return and needs to comply post-deadline.
Received an intimation or notice regarding discrepancies in past filings.

However, ITR-U cannot be used to:

Claim a refund of excess tax paid.
Reduce previously reported income to lower tax liability.
Increase the amount of carried-forward losses or unabsorbed depreciation.

Timeframe for Filing ITR-U

Initially, ITR-U allowed taxpayers to update their returns within 24 months from the end of the relevant assessment year. However, as per the Union Budget 2025, this period has been extended to 48 months, giving taxpayers additional time to make necessary corrections.

Extended Deadlines as Per the Union Budget 2025

With the revised filing window, taxpayers can now file ITR-U within four years from the end of the relevant assessment year. Below are the specific deadlines for different financial years:

For FY 2021-22 (AY 2022-23): ITR-U can be filed until March 31, 2025.
For FY 2022-23 (AY 2023-24): ITR-U can be filed until March 31, 2026.
For FY 2023-24 (AY 2024-25): ITR-U can be filed until March 31, 2027.

The extended timeline ensures taxpayers have a broader window to correct errors and disclose any omitted income before facing legal consequences.

Additional Tax Liability

Filing an updated return under ITR-U comes with additional tax liability. The government imposes extra charges to encourage timely compliance and deter intentional underreporting of income. The additional tax is calculated as a percentage of the total tax and interest payable and increases progressively based on how late the updated return is filed.

Tax Penalties for Late Filing

Taxpayers filing ITR-U must pay an additional tax, which varies depending on the time elapsed since the end of the relevant assessment year. The longer the delay, the higher the penalty. This ensures that taxpayers do not use the extended window to defer their tax liabilities intentionally.

Breakdown of Additional Tax Payable at Different Timelines

Within 12 months from the end of the assessment year – Additional 25% of the total tax and interest payable.
Between 12 and 24 months – Additional 50% of the total tax and interest payable.
Between 24 and 36 months – Additional 60% of the total tax and interest payable.
Between 36 and 48 months – Additional 70% of the total tax and interest payable.

These penalties apply in addition to the original tax liability and interest. If the updated return results in an increase in taxable income, the additional tax must be calculated accordingly.

Restrictions and Limitations

While ITR-U provides a valuable option for taxpayers to correct their returns, it comes with certain restrictions to prevent misuse. These limitations ensure that taxpayers use this provision only for its intended purpose—correcting genuine mistakes or omissions.

Cases Where ITR-U Cannot Be Used

To Reduce Tax Liability: A taxpayer cannot file an updated return to reduce the tax payable in an already filed return.
To Claim Additional Refunds: ITR-U cannot be used to claim a refund for excess tax paid.
To Report Lower Income: Any attempt to reduce the originally declared income is not permitted under ITR-U.
In Cases of Tax Evasion Investigations: If the taxpayer is already under scrutiny by tax authorities or has received a notice under specific sections (such as Sections 132, 133A, 148, or 153A), filing ITR-U is not allowed.

Limitations on Loss Adjustments and Refund Claims

Taxpayers cannot use ITR-U to increase the amount of losses carried forward to future years.
Losses from previous years cannot be adjusted to lower tax liability in the updated return.
If a taxpayer had mistakenly overpaid tax in the original return, they cannot use ITR-U to claim a refund of the excess amount.

One-Time Filing Restriction Per Assessment Year

ITR-U can only be filed once per assessment year for any given financial year. If a taxpayer files an updated return and later realizes another error, they cannot submit another ITR-U for the same year. This makes it crucial to ensure accuracy before submitting an updated return.

Conclusion

The ITR-U provision offers taxpayers a second chance to correct their past income tax filings, ensuring compliance and avoiding penalties. However, it comes with additional tax liabilities and strict limitations to prevent misuse. While it provides relief for taxpayers who missed filing or reported incorrect income, it cannot be used to claim refunds, lower tax liability, or increase losses. Given the one-time filing restriction per assessment year, taxpayers must carefully review their financial records before submitting an updated return. Filing within the earliest possible window minimizes the additional tax burden, making it a more cost-effective option for compliance.

FAQs

Q1. What is ITR-U, and who can file it?

ITR-U is the Income Tax Updated Return introduced under Section 139(8A) of the Income Tax Act, 1961. It allows taxpayers to correct errors, omissions, or unreported income in their previously filed returns. Any individual, company, or entity that has either missed filing a return or needs to update an already filed return can use ITR-U, provided it meets the eligibility criteria.

Q2. How is ITR-U different from a revised return?

A revised return (ITR under Section 139(5)) is used when a taxpayer wants to correct mistakes in a previously filed return within the regular deadline. In contrast, ITR-U is filed after the revision window closes, allowing taxpayers up to 48 months to update their return. Unlike a revised return, ITR-U requires the payment of additional tax and does not allow a reduction in tax liability.

Q3. What are the penalties for filing ITR-U late?

Filing ITR-U requires an additional tax payment based on how late the return is filed:

Within 12 months: Additional 25% of the tax and interest payable.
Within 24 months: Additional 50% of the tax and interest payable.
Within 36 months: Additional 60% of the tax and interest payable.
Within 48 months: Additional 70% of the tax and interest payable.

These penalties are mandatory and must be paid before filing.

Q4. Can I use ITR-U to claim a tax refund?

No, ITR-U cannot be used to claim a tax refund. The updated return is strictly for reporting additional income and paying extra tax. If a taxpayer has overpaid tax, they cannot use ITR-U to seek a refund.

Q5. there a limit on how many times I can file ITR-U?

Yes, ITR-U can be filed only once per assessment year. If a taxpayer makes another mistake after filing ITR-U, they cannot file another updated return for the same year. This is why accuracy is crucial while filing ITR-U.

Q6. What happens if I miss the deadline for filing ITR-U?

If the 48-month window for filing ITR-U expires, taxpayers lose the opportunity to voluntarily update their return. In such cases, they may receive a tax notice from the department and could face penalties, interest, or even prosecution for non-compliance.

Q7. Do I need to submit any physical documents while filing online?

No, ITR-U is filed completely online through the income tax portal. However, taxpayers must retain supporting documents (e.g., income statements, balance sheets, tax payment receipts) for verification in case the tax department requests further details.

Q8. Can I file ITR-U for multiple years at once?

Yes, taxpayers can file ITR-U for multiple past years, as long as each return is filed separately within the permitted 48-month timeframe. The updated return for each financial year must be filed individually, following the applicable tax rates and penalties.

Q9. Will filing ITR-U trigger a tax audit?

Not necessarily. Filing ITR-U does not automatically lead to an audit. However, if the tax department finds discrepancies, underreporting, or suspicious activity in the updated return, they may scrutinize the case further.

Q10. How can I calculate the additional tax payable while filing ITR-U?

The additional tax payable includes:

The regular tax liability on the updated income.
Interest under Sections 234A, 234B, and 234C (if applicable).
The additional penalty based on the delay (25% to 70% of tax and interest). The income tax portal provides an automatic tax calculation tool to assist taxpayers in determining the exact amount.

Q11. What should I do if I made a mistake while filing ITR-U?

If an error is made while filing ITR-U, corrections cannot be made since only one updated return is allowed per assessment year. In such cases, taxpayers may have to wait for an official notice from the tax department and respond accordingly.

Q12. Can I file ITR-U if I have already received a tax notice?

It depends on the nature of the notice. If a taxpayer receives a tax scrutiny or reassessment notice, ITR-U cannot be filed. However, if the notice is not related to assessment or reassessment proceedings, ITR-U can still be filed, provided the 48-month window is available.

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Filing ITR-U for Missed Tax Returns: When and How to Use the Updated Return Option

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