The Government has proposed an amendment to Section 263 of the Income Tax Act, 2025, to expand the scope for filing updated returns of income. Currently, Section 263(6) allows taxpayers to file an updated return within 48 months from the end of the financial year following the relevant tax year, subject to certain restrictions. Updated returns cannot generally be filed to declare a loss, reduce tax liability, or increase a refund, and are not allowed if assessment, reassessment, search, survey, or prosecution proceedings are ongoing or completed.
Under the proposed amendment, taxpayers who have filed a return of loss may now submit an updated return to reduce the amount of loss claimed, even if it does not result in taxable income. This change addresses stakeholder suggestions and provides greater flexibility in correcting previously filed loss returns.
The amendment is aimed at aligning practices under the Income Tax Act, 1961, with the updated provisions of the 2025 Act. It is expected to come into force from 1st April 2026 for the Income-tax Act, 2025, and from 1st March 2026 for the Income-tax Act, 1961.
This move is part of the Government’s broader effort to simplify compliance, reduce taxpayer grievances, and ensure that taxpayers have sufficient flexibility to adjust their filings in a legally compliant manner.
Official copy of the Clause is as follows
Scope of filing of updated return in the case of reduction of losses – reg.
Section 263 of the Income Tax Act, 2025 ("the Act") provides for filing of Income Tax Return by taxpayers. The said section deals with the comprehensive framework that lays down class of persons who are required to file a return, the due dates, and the different types of returns that may be furnished. It covers the original return, belated return, revised return and the updated return.
2. Further, section 263(6) of the Act deals with the updated return of Income. It allows a taxpayer, whether or not a return was furnished earlier, to file an updated return within 48 months from the end of the financial year succeeding the relevant tax year. The said section further imposes certain restrictions on updating the return of Income. E.g. updated return cannot be a return of loss, cannot reduce tax liability, and cannot increase a refund. Filing an updated return requires payment of additional income-tax, as prescribed, and it is not permitted in cases where assessment, reassessment, search, survey, or prosecution proceedings are pending or completed.
3. Furthermore, section 263(6)(b) provides that taxpayer may file the updated return in such cases where original return filed under section 263(1) of the Act is a return of loss and updated return being filed thereafter, is a return of income. However, section 263(6)(c)(i) of the Act had created a restriction that updated return cannot be furnished in such cases where updated return is a return of loss for the said tax year.
4. In this regard, suggestions were received from the stakeholders that updated return may also be allowed in such cases where taxpayer is reducing the amount of loss in comparison to the amount of loss claimed in the return of loss furnished within the due date specified under sub-section (1).
5. In view of the above, it is proposed to amend section 263(6) of the Act, so as to allow filing of updated return in such cases where taxpayer reduces the amount of loss in comparison to the amount of loss claimed in the return of loss furnished within the due date specified under sub-section (1).
6. It is further proposed that the above amendments in the Income-tax Act, 2025 shall come into force from the 1st day of April, 2026.
7. It is further proposed that similar amendment shall be made in the Income-tax Act, 1961 to align with the proposed amendments in the Income-tax Act, 2025.
8. It is also proposed that amendment in the Income-tax Act, 1961 shall come into force from 1st day of March, 2026.
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