Updated Income Tax Return u/s 139(8A) in Form U: Explained in Detail

Introduction to New Provisions of Income Tax Return and Its Importance

In a bid to further streamline the income tax return process, and to continue empowering taxpayers, the Government of India introduced new provisions in Budget 2022.

By enhancing Section 139(8A) of the Income Tax Act, it was ensured that taxpayers are given an additional window to file their Income Tax Returns voluntarily, hence proposing an efficient system that reduces the tax compliance burden in the future.

This development came into effect on 01.04.2022 and was well-received by tax experts and the taxpayer community both.

Its principal objective is to curtail the legal disputes that emerge from errors or omissions in the Income Tax Return (ITR) after the timeline for filing revised returns has passed.

To further simplify the process, the Central Board of Direct Taxes (CBDT) inserted Rule 12AC, notifying the income tax return form (Form U).

This rule underpins the method for filing an updated return u/s 139(8A), as announced in Notification 48/2022 dated 29.04.2022.

It is undeniable that the benefits of filing Income Tax Returns are manifold, from easing the process of applying for loans to acting as proof of income.

Furthermore, documenting one’s financial history is extremely important for individuals and businesses alike.

Owing to this, the administration believes that by providing taxpayers an extra period to willingly alter their Return, the burden of tax will be reduced alongside future tax compliances.

A comprehensive comprehension of AIS, TIS & Form 26AS, which is crucial before filing ITR, can further help in error-free tax return filing.

Detailed Explanation of Updated Income Tax Return u/s 139(8A) in Form U

The newly introduced Section 139(8A) of the Income Tax Act has revolutionized how taxpayers approach corrections in their ITRs by providing a subsequent chance to rectify any mistakes.

This provision ensures that individuals and entities can update their filings without facing repercussions for honest errors or omissions they might have missed earlier.

What is Form U and Who Should Use It?

Form U is the designated form for filing an updated income tax return as prescribed by the CBDT. It caters to taxpayers who have discovered inaccuracies that led to income underreporting or have previously skipped filing their return entirely.

This form can be utilized regardless of whether the original return, belated return, or revised return was filed or not.

Eligibility Criteria For Filing Form U

Here are some scenarios wherein a taxpayer should consider filing the updated Return:

• An omission or mistake was discovered in the originally filed return, be it in the version of the regular, belated, or revised return.
• The error results in additional taxable income and consequently, an additional tax outflow.
• Importantly, the taxpayer must rectify such returns within 24 months from the end of the concerned assessment year.

It is imperative to note that the updated return must be submitted with proof of payment of tax, as delineated under section 140B. This resonates with the commitment towards fiscal responsibility and compliance that the NRI Taxation policies also advocate.

Circumstances to Refrain from Filing Updated Return

While the updated return system is designed to be taxpayer-friendly, there are certain conditions under which taxpayers should not utilize Form U to file an updated return.

These situations include:

• Intent to claim an increase in refund compared to the one claimed in the originally filed return.
• Desire to report a decrease in tax liability.
• To register an increase in the reported loss from the previous statements.

It is clear that the system is designed not to favor those who seek to manipulate it to optimize tax benefits retrospectively but to assist those who inadvertently erred in their filing.

Restrictions on Updating Filled Returns

The provision to file an updated return allows for course correction but enforces a strict no do-over policy.

Here’s why:

• Taxpayers are allowed to file the updated return only once for a particular assessment year under Section 139(8A).
• Once the updated return is filed, it can never be re-updated.

Key Reasons to File an Updated Return in “Form U”

The Income Tax Department requires a concise explanation for the changes made in an updated tax return. When filling out Form U, taxpayers must select one of the following reasons to indicate the nature of their update:

• Income was not reported correctly in the originally filed return.
• Failure to file a return for the concerned assessment year.
• Incorrect reporting of income.
• Inapt selection of income heads.
• Reduction in the claim of carry forward loss, unabsorbed depreciation, or tax credit (under sections such as 115JB/115JC).
• Inaccurate application of the tax rate.
• Other specifiable reasons.

Ineligibility Criteria for Updated Return u/s 139(8A)

Despite the flexibility offered by Section 139(8A), not all taxpayers are eligible to file an updated return. Individuals or entities fall into ineligibility if:

• A survey under Section 133A, other than for checking TDS/TCS compliance under Section 133A(2A), has been conducted for the relevant assessment year.
• A search operation was carried out under Section 132 or if any books of account or other assets were requisitioned under Section 132A.
• There are pending assessment, reassessment, or revision proceedings, or such proceedings have already been completed for that year.
• Prosecution proceedings under Chapter XXII of the Act have commenced for the year in question.
• Information affecting the taxpayer has been received under an agreement referred to in Sections 90 or 90A, regarding international taxation, and has been communicated to the taxpayer.
• The Assessing Officer has received relevant information under acts such as PMLA, Black Money Act, or Benami Transactions Act, which has been informed to the individual or entity.

In the next section, we shall discuss the benefits and merits of filing an updated return, along with providing a clear understanding of the timeline and additional charges involved.

Stay tuned and consider reading more about the reassessment procedure under Section 148A for additional clarity about the positions one may find themselves in with regard to tax audits and similar assessments.

The Advantages of Filing an Updated Return Under Section 139(8A)

Filing an updated return under Section 139(8A) offers distinct benefits to conscientious taxpayers. It presents an opportunity to rectify errors without inviting the usual consequences that accompany discrepancies in financial reporting. Here are a few advantages:

• Mitigated Compliance Complications: It greatly reduces the risk of compliance issues, legal penalties, and potential proceedings. This proactive approach can significantly ease the future tax burdens and associated compliances.
• Cost Efficiency: The tax, along with interest, is typically more manageable within the updated return framework compared to what might accrue during legal proceedings or litigations.
• Extended Filing Period: Taxpayers have the leverage of an extended timeframe of 24 months to revisit and refine their financial disclosures. This period is substantial for reviewing past submissions and making necessary amendments.

Timeline for Filing an Updated Return

The updated return must be filed within a precise window to be considered valid:

• The window extends to a period of twenty-four (24) months from the end of the relevant assessment year.
• For demonstration, considering the Financial Year (FY) 2020-21, an updated return can be submitted until 31st March 2024, accounting for the 24 months post the end of the assessment year 2021-22.
• This timeline is set after the deadlines to file the original return under Section 139(1), or a revised return under Section 139(4), or a belated return under Section 139(5) have expired.

Implications of Additional Tax

In the context of Section 139(8A), an additional tax component is levied on updated returns. The magnitude of this tax is determined by the timing of the return submission:

• If the updated return is filed within twelve months from the end of the relevant assessment year, an extra tax, functioning as a penalty, will be 25% of the aggregate sum of the calculated tax and interest due.
• However, if the return is filed after these initial twelve months but before the conclusion of 24 months from the assessment year’s end, the surcharge doubles to 50% of the aggregate amount of tax and interest.

Conclusion and Next Steps

With the new update in the Income Tax Act, taxpayers now have a permissible and explicit channel to correct their tax filings, which not only harbors goodwill but also converges on the objectives of fiscal accuracy and full compliance.

In the following segment, we shall explore a variety of frequently asked questions (FAQs) that taxpayers typically encounter regarding the updated returns under Section 139(8A). This will further enhance understanding and provide clarity on practical applications of these provisions.

Should you require assistance in navigating through your tax filings or need expert advice, consider exploring comprehensive Income Tax services by seasoned professionals.

Frequently Asked Questions (FAQs) About Updated Income Tax Returns u/s 139(8A)

As taxpayers acquaint themselves with the updated return framework under Section 139(8A), many questions arise that seek clarity on its practical implementation. In this section, we aim to address some of the most common inquiries:

Can I file an updated return if I have already been subjected to a tax audit?

No, if the proceedings of a tax audit under any sections, including Section 133A or 132 of the IT Act, have been initiated for the relevant assessment year, you are not eligible to file an updated return.

If I realize I made an error but already received a refund, can I still file an updated return?

You cannot file an updated return if it will lead to an increase in your refund amount or a reduction in the tax liability that was previously declared.

What happens if I discover another mistake after I file an updated return?

Taxpayers are given only one opportunity to file an updated return for a particular assessment year. Hence, after an updated return is filed, it cannot be altered again.

Is there an additional charge or penal interest for filing an updated return?

Yes, filing an updated return entails an additional tax of 25% or 50% of the calculated tax and interest due if filed within 12 months or after 12 months and before 24 months of the end of the relevant assessment year, respectively.

Are non-residents also eligible to file updated returns under Section 139(8A)?

Non-residents, who fulfill the stipulated conditions for filing an updated return and are not subject to the ineligibility criteria, can file an updated return. For details on specific cases such as NRI taxation, it would be prudent to consult a tax advisor.

What if I never filed a return for the relevant assessment year, can I use the updated return facility to file it now?

One of the reasons for filing an updated return in Form U is the failure to file a return previously. So, yes, in this case, an updated return can be used to file for the assessment year in question.

How will I know if I am not eligible to file an updated return?

You might be ineligible due to various reasons such as ongoing reassessment procedures, search and seizure operations conducted against you, and more. It is best to review the criteria under Section 139(8A) or consult an expert to confirm your eligibility.

Will the updated return affect my carry forward losses or unabsorbed depreciation?

Filing the updated return may change your financial statements’ details, including carry forward losses and unabsorbed depreciation, if these are the items requiring correction.

Reaching the Finish Line

Preparing and filing income tax returns can sometimes be a daunting task, particularly with the complexities associated with errors and misinformation.

However, the provision under Section 139(8A) marks a significant step towards remedying unintentional slips, thereby promoting tax compliance and reducing the incidence of disputes.

In essence, for informed decision-making and avoiding complications, it is highly recommended that taxpayers stay abreast with the latest updates and seek professional guidance when necessary.

If you have more queries or need in-depth assistance with your tax matters, explore specialized services such as income tax filing or gain insights into specific International Taxation issues to ensure seamless taxation procedures.