Now get two year window for refiling income tax return

The Union Budget has sought to give opportunity to taxpayers to rectify mistakes related to misreporting of income when filing income tax return for a financial year. It has created a provision for allowing such taxpayers to file an updated return within two years from the end of the relevant assessment year. This is irrespective of whether the taxpayer has filed a return previously for the relevant assessment year, or not. The filing of the updated return will be allowed only after payment of amount equal to 25% or 50% as additional tax on the tax payable on the additional income furnished.

Currently, an individual gets time only till 31 December 31 of the relevant assessment year to file a revised ITR. CA Amit Gupta, MD & Co-Founder, SAG Infotech, asserts, “The updated return filing provision is much better than the previous with the time bracket of 2 years at maximum to the end of the assessment year.” The Finance Minister Nirmala Sitharaman pointed out in her Budget speech that presently, if the department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return, Sitharaman said. Sudhir Kaushik, CEO, Taxspanner, observes, “Sometimes the tax filer misses out on reporting certain income either due to ignorance or otherwise, but gets captured in the Annual Information Statement. This triggers a notice to the taxpayer who then has to go through a lengthy process of appeal. This new provision will ease the burden on tax payer and give sufficient time to get the tax return rectified without punitive action.” However, some other conditions also need to be fulfilled to be able to file updated income tax returns. According to the Memorandum to the Budget, there should be no decrease in the income tax liability or resulting in income tax refund from the updated ITR.

Further, as a deterrence against tax evasion, the Budget has provided that no set off of any loss shall be allowed against undisclosed income detected during search and survey operations. This is in response to cases where individuals or entities have set off brought forward losses against undisclosed income detected in search operations. With this provision, such individuals will no longer find any space to wiggle out of tax liability. “Some entities were found to be using business losses as a shelter to argue against money being forfeited. This provision puts an end to this argument,” points out Kaushik.