Filing an Updated ITR: What You Need to Know
As the deadline to file updated income tax returns (ITR) for the financial year 2020-21 approaches on March 31, 2024, taxpayers are reminded of the provisions introduced by the Finance Act of 2022. This provision allows individuals who missed filing their original return or failed to report certain income to submit an updated ITR, also known as ITR-U, within 24 months from the end of the relevant assessment year.
Additional Tax Implications and Filing Process
While there are no financial penalties for filing an updated return, taxpayers are required to pay an additional tax as per Section 140B of the Income Tax Act. If the ITR-U is filed within 12 months from the end of the relevant assessment year, a 25% additional tax on the tax dues is applicable. However, if filed within 24 months, the additional tax increases to 50%. For updating the ITR for FY20-21, a 50% additional tax will be incurred.
To file an updated return, taxpayers must use the ITR forms notified for the respective assessment year along with the newly-introduced form ITR-U. The computation of tax payable for an updated return includes the total income tax liability, encompassing tax payable, interest, late filing fees, and additional tax. The net tax liability is then calculated by subtracting TDS/TCS/advance tax/tax relief from the total income tax liability.
Importance of ITR Filing and Consequences of Non-Compliance
Filing an ITR is not just a legal requirement but also a civic duty. It allows individuals to claim refunds of excess tax paid/deducted during the financial year and ensures compliance with income tax laws. Failure to file ITR may result in the inability to carry forward losses, imposition of penalties ranging from 50% to 200% of the assessed tax, and in extreme cases, prosecution.
Given these implications, taxpayers are urged to adhere to the deadline and fulfill their ITR filing obligations promptly. It is essential to stay informed about the process and seek professional assistance if needed to ensure compliance with tax regulations and avoid any adverse consequences.
