Taxpayers get 2-yr window to revise returns, fix errors
Tax of 25-50% on due amount to be levied on those who update ITR after the end of the assessment year
NEW DELHI: Taxpayers will now have a window of 24 months from the end of the assessment year to file a revised income tax return (ITR) in case they missed reporting an income or discover an error in the first tax return filed, according to the Union Budget unveiled by finance minister Nirmala Sitharaman on Tuesday.
The new timeline has been introduced to replace the current deadline of either three months before the end of the assessment year or before the completion of assessment, whichever is earlier.
This provision aims to promote voluntary tax compliance for taxpayers. “This additional timeline (current window of 2-5 months) for filing a revised/ belated return may not be adequate when we factor in utilization of huge information and data available coupled with the “nudge approach” that motivates the taxpayer towards the desired objective of voluntary tax compliance, starting with filing of correct tax returns,” said the Memorandum to The Finance Bill, 2022. “It (the proposal for updated tax return) will facilitate ease of compliance to the taxpayer in a litigation free environment.
Tax experts agreed. “The intention is to allow taxpayers an opportunity to pay unpaid taxes without severe consequences, in case they have made a mistake at the time of filing and return is already processed,” said Archit Gupta, founder and chief executive officer, Clear.
This option will also be available to those who haven’t filed a tax return previously for the relevant assessment year.
These changes will come into effect from April, 2022.
“The new timeline for updating ITRs might apply to tax returns for financial year 20212022 as well as they will be filed in the assessment year 2022-23, which is when the rule is kicking in,” said Sandeep Sehgal, partner - tax, AKM Global, a tax and consulting firm.
Penalty of up to 50%
The extended timeline is not all good news for taxpayers as those who choose to update their ITR after the end of the assessment year will be slapped with an additional tax of 25%-50% on the due tax. As per the finance bill, the taxpayer will have to pay 25% additional tax on the aggregate of the total tax and interest accrued on it when the updated ITR is filed within 12 months after the end of the assessment year.
The penalty payable will be doubled to 50% of the aggregate of the total tax and interest accrued if the ITR is updated between 13 months and 24 months. Penal interest on selfassessment tax is levied at 1% per month on a simple interest basis.
“This amount is payable in addition to the regular tax due on the additional income reported, and in addition to regular interest and fee which is applicable for delayed tax payments,” said Alok Agrawal, partner, Deloitte.
Such taxpayers will also be required to pay the late filing fee, said Karan Batra, founder, charteredclub.in.
The penalty to file belated ITR is up to ₹5,000.
Moreover, there are certain conditions under which a taxpayer can update their ITR within the extended timeline. Foremost, taxpayers can’t file a revised return that reduces their tax liability.
Second, taxpayers who have received a scrutiny from the taxman or whose bullion, jewellery, valuable articles or books of account have been seized or requisitioned under section 132 or section 132A, will also not be allowed.
In another move that will reduce litigation burden for taxpayers, the Union Budget has proposed a system under which repetitive appeals by the income tax department on identical issues can be avoided.