Unlocking Tax Compliance: Demystifying Updated Income Tax Returns

Certainly! In an effort to encourage people to comply with tax regulations, the government introduced the concept of an "updated income tax return" as part of the 2022 Budget. This means taxpayers have the option to either file a new tax return or modify an existing one within a specific timeframe. They would need to pay extra taxes, interest, and penalties, aiming to increase compliance and prevent penalties if errors are discovered later by tax authorities.

Who can do this?

If someone has already filed their tax return (on time, late, or even a revised version), or if they haven't filed at all, they can update their return within two years after the assessment year ends. This option can't be used to get a tax refund. For instance, for the financial year 2020-21 (assessment year 2021-22), they can update their return until March 31, 2024.

Who's eligible?

All types of taxpayers - individuals, families, businesses, etc. - can use this option. They must choose a reason for updating the return like not filing before, reporting income incorrectly, selecting the wrong income categories, and so on.

How to calculate tax?

If someone hadn't filed their return earlier, they need to pay the tax owed, plus interest, late fees, and an extra tax for updating. This is calculated by considering advance tax paid, any tax already deducted, relief claimed, and other factors. If they had filed before, they still need to pay additional taxes, interest, and fees.

How is the additional tax calculated?

If the updated return is filed after the initial due date but before 12 months from the end of the assessment year, the extra tax is 25% of the total tax plus charges. If filed between 12 and 24 months, it's 50% of the total tax plus charges.

How to file online?

1. Log in to the tax portal.
2. Click on 'File Income Tax Return'.
3. Choose the relevant assessment year and select '139(8A)-updated return'.
4. Upload the offline JSON file.
5. Provide the required information, including acknowledgment of the original return.
6. Enter the additional income and calculate tax.
7. Verify and submit the updated return.

This concept aims to simplify the process of correcting or updating tax returns while ensuring timely compliance with tax laws.

The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently, the author is the founder and managing partner at RRL Global Services. You can submit your queries or write to us at  rrlglobal@yahoo.com