ITR-U Form: A Complete Guide to Filing Updated ITR

Introduced by the Government of India in the Union Budget 2022, the Updated ITR-U (short for Income Tax Return) form lets taxpayers correct errors or omissions in the Income Tax Returns they have already filed. One can submit this form within two years after the relevant assessment year ends. 

What Is ITR-U?

ITR-U stands for Income Tax Return — Updated. Introduced under Section 139 (8A) of the Income Tax Act, 1961, this form allows taxpayers to update their income tax returns within two years from the end of the relevant assessment year.

In simple words, if you've missed filing your tax return, omitted some income details by mistake, or made errors in your original return, the ITR-U form gives you a chance to set things right without facing big penalties. 

The government understands that mistakes happen. To encourage voluntary compliance and reduce litigation, the Income Tax Department introduced ITR-U. It's a taxpayer-friendly move aimed at:

• Promoting Transparency: Encouraging taxpayers to disclose omitted income.
• Simplifying Compliance: Making it easier to update returns without complicated procedures.
• Reducing Penalties: Allowing taxpayers to correct errors before the tax department initiates any action.

Eligibility Criteria for Filing ITR-U

Not all taxpayers are eligible to file ITR-U. The eligibility criteria are as follows:

Who Can File ITR-U:

• Taxpayers who have not filed their original return.
• Anyone who has filed the income tax return but needs to rectify mistakes or omissions.
• Taxpayers who wish to declare additional income that was not reported earlier.

Who Cannot File ITR-U:

Not all taxpayers are eligible to file ITR-U. The eligibility criteria are as follows:

• If after the updated return, the taxpayer is likely to get a refund or an increased refund amount.
• If the filer's tax liability is likely to be reduced,
• Cases involving search or survey operations.
• If prosecution proceedings have been initiated against the taxpayer.
• If the assessment or reassessment, recomputation, or revision is awaited or through
• If the Assessing Officer has information against the taxpayer under the Prevention of Money Laundering Act or the Black Money Act.
• If the updated return pertains to undisclosed foreign income or assets.
• If the updated return is filed beyond 24 months from the end of the relevant assessment year.

When Can You File ITR-U?

You can file an ITR-U within 24 months (two years) from the end of the relevant assessment year. For instance, the deadline for filing ITR-U for Assessment Year (AY) 2023-24 is 31 March 2026, and for AY 2024-25, it will be 31 March 2027.

Filing an ITR-U involves paying an extra tax liability. Here's how it works: If you file within 12 months from the end of the relevant AY, you need to pay an additional 25% on the tax and interest due. Similarly, if you file after 12 months but before 24 months, the additional amount increases to 50% of the tax and interest due.

This extra charge acts as a fee for delayed compliance but is more favorable compared to penalties if discrepancies are found during assessments.

How to File an ITR-U Return: Step-by-Step Guide

Filing the ITR-U form involves several steps. The straightforward guide below will help you to file the ITR-U.

Step 1: Gather Necessary Documents

Before you begin, make sure you have:

• Your PAN card details.
• Bank account information.
• You need to report details of additional income.
• Calculation of the tax payable, including the additional tax.

Step 2: Access the Income Tax E-Filing Portal

• Visit the official website: www.incometax.gov.in.
• Log in with your PAN (i.e., your User ID) and password.

Step 3: Go to 'File Income Tax Return'

• On the dashboard, click on 'e-File.'
• First, opt for 'Income Tax Returns' and then 'File Income Tax Return'.

Step 4: Select your Assessment Year, then File Type

• Select the relevant AY to file the ITR-U for.
• Choose the pertinent ITR form (whether ITR-1 or ITR-2) based on your income sources.
• Select '139 (8A) - Updated Return' as the reason why you are filing.

Step 5: Provide Details in the ITR-U Form

You'll need to specify:

• Why are you filing the updated return (e.g., income not reported earlier)?
• Additional income is being reported.
• Tax computation considering the additional income.

The form will require you to input the amount of missed income and calculate the tax accordingly.

Step 6: Calculate the Tax Payable

The system will help compute:

• Tax on updated income.
• Interest falls under Sections 234A, 234B, and 234C — if it’s applicable.
• Additional tax (25% or 50% of tax and interest).

Step 7: Pay the Tax Due

• Generate a Challan No./ITNS 280 for payment.
• Pay the tax online through net banking, debit card, or other methods.
• Ensure you save the receipt for reference.

Step 8: Submit and Verify the Return

After payment, submit the ITR-U form. You can verify your return using:

• EVC or Electronic Verification Code through net banking or Aadhaar OTP.
• Digital Signature Certificate (DSC), if applicable.
• Sending a physical copy of ITR-V to CPC, Bengaluru, if electronic verification isn't possible.

• Double-check all details before submitting. Errors can lead to rejection or further complications.
• You cannot use ITR-U to claim a refund or increase the refund amount.
• You are allowed to file only one ITR-U in one assessment year.
• Retain all records and computations used in filing the ITR-U for at least six years.

Filing ITR-U offers several advantages, such as avoiding penalties and prosecution by voluntarily correcting errors, providing peace of mind through compliance, and improving your compliance rating with the tax department. However, delaying the filing can lead to higher additional tax—50% extra if filed after 12 months—and increases the risk of the tax department identifying discrepancies, making timely action crucial.

Conclusion

Introducing the ITR U form is a significant step toward simplifying tax compliance in India. Whether you missed the original deadline, forgot to report income, or made an error in your filing, ITR-U offers a way to make amends. Understanding what ITR-U is and how to file an ITR-U return can ensure you're on the right side of tax laws. It's not just about avoiding penalties—it's about taking responsibility and contributing to the nation's progress.