Pay 25% to 50% penalty to update your income tax return upto 2 years later, says Budget 2022

Income tax return filers will be allowed to update their returns upto 2 years after the end of the relevant assessment year in case they forgot to include any income when the return was first filed. However, an additional tax of 25% to 50% on the tax and interest due on the additional income will be payable. A new sub-section (8A) in Section 139 is proposed to be introduced under the Income-tax Act 1961.

Currently, an individual gets time till December 31 (unless extended by the government) of the relevant assessment year to file a revised ITR to provide a correct picture of the income earned by him/her from various sources during the financial year. The newly proposed law will give taxpayers two years from the end of the relevant assessment year to file their correct updated ITR if he/she has missed an opportunity to file their revised return. However, while there is no penal tax (i.e. tax in addition to that payable on the additional income disclosed) payable in case of a revised return, filing of ‘updated’ return will involve payment of tax on the tax payable on the additional income disclosed.

As per the Memorandum to the Budget 2022, “It is proposed to introduce a new provision in section 139 of the Act for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year, or not. The proposal for updated return over a period longer than that is provided in the existing provisions of Income-tax Act would on the one hand bring use of huge data with the IT Department to a logical conclusion resulting in additional revenue realization and on the other hand, it will facilitate ease of compliance to the taxpayer in a litigation free environment.”


The memorandum further says, “It is proposed that the taxpayers may be given some more time under the Act to file particulars of their income for a previous year in an updated return. A payment of additional tax by persons opting to furnish their returns in the newly provided timelines is also required. It is proposed that an amount equal to twenty five percent or fifty percent as additional tax on the tax and interest due on the additional income furnished would be required to be paid.”

However, there are conditions that need to be fulfilled to be able to file updated income tax returns. There should be no decrease in the income tax liability or resulting in income tax refund from the updated ITR.