File ITR-U to cut prosecution risk

With the December 31 deadline for filing revised income tax returns now over, many taxpayers who later spot missed income or reporting errors may think they have no option left. Section 139(8A) of the Income-tax (I-T) Act provides one more route: updated return (ITR-U).

What is an updated return?

Section 139 of the I-T Act, 1961, sets out return-filing requirements. Returns filed within the due date under Section 139(1) are original returns. Section 139(4) allows belated returns to be filed up to December 31 of the assessment year. Section 139(5) allows filing of a revised return within the same time limit to correct errors or omissions.

“The updated return under Section 139(8A) goes beyond these timelines and allows taxpayers to voluntarily disclose previously unreported income on payment of additional tax,” says Itesh Dodhi, director, Nangia & Co LLP.

Who can file it?

Any taxpayer — individual, firm or company — can file an updated return unless the Act specifically bars it. This option also remains open to those who did not file a return for the year earlier.

Taxpayers should consider ITR-U if they omitted income, wrongly claimed deductions or exemptions, or made reporting errors that led to a shortfall in tax payment. “The facility is strictly intended for voluntary disclosure of additional income and payment of the resulting tax,” says Deeptashree Shetty, partner, global employer services, tax & regulatory services, BDO India.

“An updated return cannot be filed if it results in a refund or reduces tax liability. It cannot be filed if search, survey, reassessment or prosecution proceedings have begun, or if tax authorities have already detected the omission,” says Dodhi.

Publication – Business Standard

By Itesh Dodhi

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