The Income Tax Department introduced a new form, ITR-U, for taxpayers to update their Income Tax Returns (ITR). Under Section 139(8A) of the Income Tax Act, individuals can use Form ITR-U to file updated returns, allowing for corrections in prior filings, modifications in reported income heads, and reduction of carry-forward losses, among other benefits.
Taxpayers can file the ITR-U form within two years from the end of the relevant assessment year, with valid reasons required for updated returns. These reasons cover errors like inaccurate reporting of income, selection of incorrect income heads, or reduction of carried forward losses. The updated return (ITR-U) must be submitted with the corresponding ITR form (ITR 1 – 7).
The deadline for filing updated ITR for FY 2021-22 may be extended to March 31, 2025, from the current deadline of two years ago. This change, proposed by Finance Minister Nirmala Sitharaman, aims to allow a four-year window for updated returns, offering taxpayers increased flexibility in tax management.
Taxpayers facing late filing penalties should know that delays beyond 24 months lead to 60% additional tax, escalating to 70% after 36 months. Filing sooner lessens the burden; for example, filing within 12 months results in a 25% penalty, rising to 50% if filed within 12-24 months.
Failure to report extra income within four years results in inability to do so further, potentially leading to a tax penalty of up to 200%. Timely and precise income reporting by taxpayers is crucial to dodge severe penalties.
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