Don't let the taxman catch you: File your updated ITR before it's too late; check important dates, eligibility, more

The deadline looms. For many taxpayers, the eleventh hour for filing their updated Income Tax Return (ITR) is fast approaching. This window offers a crucial opportunity to rectify any errors, omissions, or previously missed income in their original tax filing. However, with the clock ticking, rushing through the process can lead to further mistakes. To ensure a smooth and accurate updated ITR filing, a well-defined checklist is your most valuable ally.

With the deadline of March 31, 2025, fast approaching for filing an updated return (ITR-U) for AY 2022-23, taxpayers should ensure the following before filing:

Gaurav Jain, Partner, Direct Tax, Forvis Mazars in India, said, "ITR-U is a form that enables taxpayers to update their income tax returns (ITRs) by correcting errors, omissions, or missed filings. It also allows filing of returns if both the original and belated filing deadlines were missed, within two years from the end of the relevant assessment year."

Eligibility check

The return is being filed within the stipulated time mentioned under Section 139(8A) of the Act, i.e., within two years from the end of the relevant assessment year.

It does not include any reduction in declared income or enhancement of carried-forward losses.

It is not filed to disclose income under ongoing assessment, survey, or search proceedings (if applicable).

The return cannot be filed when there is no additional tax outgo, i.e., when the tax liability is adjusted with TDS credit/losses and there is no additional tax liability.

Updated returns cannot be filed in cases of nil return or loss return.

Jain added, "With the updated ITR deadline nearing, a meticulous review of your income, tax liability, and payment is paramount. Begin by carefully identifying any previously undisclosed income, omitted income sources, or errors in your original return. Subsequently, recompute your total income, taking into account all relevant heads and eligible deductions. This recalculation will determine the additional tax payable, which includes not only the regular tax liability on the additional income but also a significant 50% additional tax on the due amount, considering this is the second year after the original filing due date."

Furthermore, taxpayers should factor in any applicable interest, penalties, and late filing fees. Following the income computation, it is crucial to reconcile all income, Tax Deducted at Source (TDS), and other relevant financial transactions with the information reflected in Form 26AS, the Annual Information Statement (AIS), and the Taxpayer Information Summary (TIS) to ensure accuracy and identify any discrepancies. Finally, if the updated return results in an additional tax liability, taxpayers must ensure that the amount is paid in full under Section 140B before filing the updated ITR and meticulously verifying the payment details using Challan No. 280.

Consequences of not filing an updated ITR

Inability to correct omissions or errors

"If you missed reporting any income, deductions, or other information in the original, belated, or revised return, you lose the chance to rectify those errors by filing an updated return. This could lead to potential scrutiny or reassessment later if the discrepancies are flagged by the tax department based on Form 26AS, AIS, or TIS," Jain said.

Exposure to reassessment proceedings (Section 148)

Non-filing of an updated return may prompt the Income Tax Department to initiate reassessment proceedings under Section 147 (for income escaping assessment), especially if unreported income comes to their notice during scrutiny, data analysis, or third-party reporting. After reassessment, higher penalties, additional interest, and tax liabilities may be imposed.

Higher penalties and interest on unreported income

If undisclosed income is detected later, the taxpayer may face:

A penalty of 50% to 200% on the tax due on concealed income under Section 270A (Penalty for Underreporting/Concealment).

Interest under Sections 234A, 234B, and 234C on unpaid tax.

Prosecution provisions under Section 276CC (for willful non-filing), especially if tax evasion exceeds ₹25,000.

Missed chance to mitigate additional tax liability (Section 140B)

By filing an updated return within the specified timeline:

You could have paid only 25% or 50% additional tax on the additional liability (as per the timeline).

If discrepancies are discovered later, the liability could escalate due to higher penalties and interest.

Loss of credibility and increased audit/scrutiny risk

Non-compliance reduces the taxpayer’s credibility and increases the likelihood of:

A detailed scrutiny assessment.

Higher tax audits in subsequent years due to a poor compliance history.

Prosecution risk (in severe cases)

If there is deliberate tax evasion, prosecution proceedings may be initiated under Section 276CC, leading to imprisonment of up to seven years and a fine if the unpaid tax exceeds ₹25,000. In any other case, imprisonment may extend up to two years.