Revised ITR deadline extended with a penalty in Budget 2026

Finance minister Nirmala Sitharaman has proposed to extend time available for revising returns from 31st December to up to 31st march with the payment of a nominal fee. As per the Budget document, a nominal fee of Rs 5,000 will be levied if revised ITR is filed after December 31. A penalty of Rs 1,000 will be applicable if taxable income does not exceed Rs 5 lakh. This will be levied under Section 234I.

According to the current Income Tax Act, an individual can file revised ITR for a particular assessment year by December 31. For instance, revised ITR filed for AY25-26 (FY24-25), could have been filed till December 31, 2025. However, many tax payers faced issues in claiming foreign credit .

According to Manmeet Kaur, Partner at Karanjawala & Co, extending the window for revising returns to 31st March with a nominal fee, along with staggered deadlines for different categories of taxpayers, reflects a practical approach to ease compliance pressures. It allows individuals and non-audit business cases more flexibility, reducing last-minute filing stress and errors. The measure could improve accuracy in reporting and voluntary compliance, while spreading the administrative load for the tax department.


A significant challenge had existed for individual taxpayers classified as Resident and Ordinarily Resident (ROR) who make some money from overseas. Earlier, Budget 2025 had provided some relief by allowing these taxpayers to file ITR-U (also known as updated returns) within 48 months (earlier 24 months) after the end of the relevant assessment year.

For example, in the United States, tax returns for a calendar year, e.g., 2025, are finalised by April 2026, while the Indian deadline to revise returns for FY2024–25 so far was 31 December 2025.

This mismatch led to:
●Provisional FTC estimates, which may later require correction.
●Disputes or refund delays due to inaccurate FTC computation.
●Overpayment of taxes results in large refunds that are often delayed due to verification issues.
●Cash flow disruptions and increased administrative burden for both taxpayers and the tax department.

While the December 31 deadline for belated and revised returns did not align with the global tax timelines, the current change, albeit with a small fee, as recommended by the Finance Minister is expected to help the taxpayers.

However, the last date to file belated ITR remains the same, December 31.