ITR U – All You Need to Know About Updated income tax return (ITR-U)

The income tax department has notified Form ITR-U for filing the ‘Updated’ income tax return. The government introduced the concept of updated return in income tax in the Union Budget 2022.

What is Updated Return?

The provision of updated return is available in Section 139(8A) of the Income Tax Act. The new provision allows the taxpayers to update their ITRs within two years of filing, on payment of additional taxes, in case of errors or omissions. The taxpayer can file the updated return after the relevant assessment year but within 24 months. The government has released a notification to amend the income tax rules. The new income tax rules specify the form in which updated returns need to be filed and the manner of their verification.

Who can file an updated ITR?

Any person who has furnished/not furnished an original return, belated return, or revised return can now update returns via ITR-U in case of any wrong statement or omission. You can update returns for FY 2019-20 and subsequent assessment years as per the newly inserted provisions in the IT Act. A taxpayer could file only one updated return for each assessment year.

Time limit to file ITR-U

The income tax provisions related to ITR-U are applicable from 1st April 2022. The time limit for filing ITR-U is 24 months from the end of the relevant assessment year. So in the current financial year 2022-23, you can file ITR-U for AY 2020-21 and AY 2021-22. 

Additional tax payment

The Act requires that the taxpayer has to pay an additional 25 per cent interest on the tax due if the updated ITR is filed within 12 months, while interest will go up to 50 per cent if it is filed after 12 months but before 24 months from the end of relevant Assessment Year. Hence, taxpayers looking to update their returns for FY 2019-20 will need to pay the tax due and interest along with an additional 50 per cent of such tax and interest. For those looking to file an updated return for FY 2020-21, the additional amount will be 25 per cent of the tax payable and interest. 

What details are required to be mentioned in ITR-U?

As per the Income tax rules, the updated return (ITR-U) has to be furnished along with an updated version of the applicable ITR form (ITR 1 – 7).

In ITR-U, the taxpayer needs to specify only the amount of additional income, under the prescribed income heads, on which tax is required to be paid. No detailed income break-up must be submitted, as in the case of filing regular ITR forms. In addition to standard details like name, permanent account number (PAN), tax years, additional income reported etc., the taxpayer must also specify the exact reason for filing the updated return in ITR-U:

1. return previously not filed or 
2. income not reported correctly or 
3. wrong head of income chosen or 
4. incorrect rate of tax or 
5. reduction of carried forward losses, 
6. reduction of unabsorbed depreciation or
7. reduction of Minimum Alternate Tax (MAT) credit/Alternate Minimum Tax (AMT) credit

If the taxpayer has chosen options no. 5/6/7, then Form ITR-U requires the taxpayer to specify also the tax years wherein such carried forward loss, unabsorbed depreciation or MAT credit/AMT credit are affected because of such updated return. It further requires to mention whether any updated or revised return has been filed for such affected tax years.

Further, it is required to mention the challan details for the additional tax paid for the updated return. 

How to compute the tax payable for an updated return?

The updated return has to be furnished in Form ITR-U, along with an updated version of the applicable tax return form (Form ITR 1 – 7). The net tax liability for an updated return should be calculated as per the provisions (Section 140B) of the Income Tax Act as follows:- 

Sr. No.	Particulars	Match figure from	Amount (in Rs)
A.	Tax payable on additional income as per modified ITR (as per Part B-TTI of modified ITR)	Modified ITR (submitted along with ITR-U)	XXXX
B.	Interest levied, if any, on additional income under Section 234A/234B/234C (as per Part B-TTI of modified ITR)	Modified ITR (submitted along with ITR-U)	XXXX
C.	Late fee, if any, under Section 234F (as per Part B-TTI of modified ITR)	Modified ITR (submitted along with ITR-U)	XXXX
D.	Taxes paid or relief TDS/TCS/Advance Tax/regular assessment tax/Relief		XXXX
E.	Total refund issued (including interest)/claimed as per the original return	Original return filed	XXXX
F.	Aggregate tax liability on additional income	A+B+C+E-D	XXXX
G.	Additional tax 25% or 50% on (F-C)		XXXX
H.	Net Amount Payable	F+G	XXXX

How to verify the updated return?

ITR-U can be verified only through a Digital Signature Certificate (DSC) in tax audit cases and filing of return by a political party, whereas an alternative option, Electronic Verification Code (EVC), is given for the non-tax audit cases. However, the verification option by posting the acknowledgement to Bangalore has not been specified.

Who cannot file the updated return?

If search or survey or prosecution proceedings are initiated against the taxpayers for the relevant assessment year, they cannot file the updated return. Moreover, the taxpayer cannot file an updated return even if assessment/reassessment/revision/re-computation is pending or completed for the relevant assessment year. 

Also, the Act does not allow the taxpayer to file the updated return if there is no additional tax outgo. Hence, if the total tax liability is to be reduced, losses to be adjusted against the income, there is a refund or increase in the refund amount, the taxpayers cannot file.