Income Tax: What is an updated I-T return? All you need to know

The Income Tax Department on 16 August released excel utilities for filing updated returns in ITR-3 and ITR-4 for the assessment years 2021-22 and 2022-23. Prior to this, the department also released the utilities for filing updated returns in ITR-1 and ITR-2 for these years.

Those who are not aware, the government in 2022 had introduced a new scheme permitting all taxpayers to file an updated return within 24 months from the end of the relevant assessment year.

Three years later, i.e., in 2025 -- deadline was extended from 24 to 48 months from the end of the relevant assessment year.

What is the updated return of ITR?

Updated return of ITR is a provision that allows taxpayers to update or file their ITRs on payment of additional taxes in case of errors or omissions. The provision of an updated return is available in section 139(8A) read with section 140B of the Income Tax Act.

This gives an opportunity for voluntary compliance to taxpayers to rectify errors/omissions with an objective to reduce litigation. Taxpayers can file updated returns for up to four years.

When can the updated ITR be filed?

There are several cases in which an updated income tax return can be filed. These  include the following: 

A. If the return was previously not filed, or

B. If the return was filed but i) Income was not reported correctly; ii) Wrong head of income was chosen; iii) To reduce carried forward loss; iv) To reduce unabsorbed depreciation; v) To reduce tax credit u/s 115JB/115JC and vi) Rate of tax was not correct.

When can you not file an updated ITR?

In these cases, you can not file an updated return:

1) There is a nil return or a return of a loss

2) has the effect of decreasing the total tax liability

3) Results in a refund or increases the refund due 

4) In case of search and seizure or a case where any prosecution proceedings have been initiated.

Additionally, an updated return can be filed after 36 months from the end of the assessment year if a notice to show cause under section 148A of the I-T Act has been issued.

It is important to note that a taxpayer can't change the tax regime (from old to new tax regime or vice versa) while filing an updated return.

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