In case you are applying for a visa processing, loan or credit card, and insurance, you are required to furnish the copy of three years of tax return. A typical problem would arise if the income tax return (ITR) in any of the previous years remained unfiled. The maximum you could arrange is an ITR copy of the current year.
In the Finance Bill, 2022, a new Section 139(8A) was inserted in the Income-Tax Act, 1961 (ITA). Any individual can file an updated tax return for the last two financial years, as per this provision.
This is applicable from the financial year 2019-20 onwards. And you can submit Form ITR-U irrespective of the fact whether the tax return was filed or not.
The timeline to file Form ITR-U is within 24 months from the end of the relevant assessment year (AY). For example, the AY for FY 2019-20 ends on March 31, 2021, so you can file Form ITR-U for the said year up to March 31, 2023.
Applicability for Filing of Form ITR-U
You will be required to give reasons for filing Form ITR-U. These reasons could be previous returns not filed and tax payable, missed reporting certain incomes, wrong heads of income chosen, reduction of carry forward losses, reduction of unabsorbed depreciation, reduction of tax credit under Section115JB/115JC, or wrong rate of tax, among others.
The Form ITR-U cannot be filed in case of nil return, loss return, increase in a refund, or claiming of refund. Also, it cannot be filed if search, survey, or prosecution proceedings are initiated for the said AY. Further, in case of assessment, reassessment, revision, or recomputation is pending or completed for the said AY, then it cannot be filed.
You are required to provide only the amount of income to be offered to tax under the prescribed income heads. Unlike the regular ITR forms, there is no break-up of income or any details of information required to be submitted. However, you get only one chance to file the updated tax return per assessment year.
Form ITR-U is required to be filed along with the applicable ITR-1 to ITR-7 forms.
Tax Liability on Filing of Form ITR-U
If you wish to file Form ITR-U, you would be required to pay, apart from the normal tax, an additional tax along with interest.
In case the return is filed within 12 months from the end of the relevant AY, then you will be required to provide an additional tax of 25%.
On the other hand, if you file the return after 12 months but before 24 months from the end of the relevant AY, the additional tax liability would rise to 50%.
However, the return will be considered invalid if you are filing the ITR without paying the additional tax. Also, you can file Form ITR-U only if you have at least some tax liability.
Benefits of Filing of Form ITR-U
The first and foremost benefit is that you can save yourself from scrutiny assessment under Section 143(3), best judgement assessment under Section 144, and income escaping assessment under Section 147. Also, you could avoid the hassle of survey and seizure proceedings, litigations, penalties, and prosecution.
(The author is Founder and CEO, Clear)