The author, Dr. CA Abhishek Murali,in his article explores the implications of updated return u/s 139(8A), vide Finance Bill, 2022. He highlights that the extended time period for updated return is upto 24 months from the end of the relevant Assessment Year. He addresses the scope and applicability of the proposed updated return such as, who can and cannot file the updated  return.  The author briefly discusses the penalty liable for filing updated return and underscores that the proposed provisions for updated return also provides for penalty ranging from 25% - 50% depending on when the Assessee files the return of income.  Opines that, “The likelihood the Income Tax will now issue notices (including re-opening notices for earlier year) to defaulters who have not filed or not disclosed their incomes properly is much higher and likely to happen”.  He concludes that even if the provisions for updated return may seem steep, it’s still largely beneficial to the Assessee to be able to disclose the income and file the updated return upto 2 years. 

Updated Return u/s 139(8A) – A Comprehensive Snapshot of the New Type of ReturnBiggest Amendment in Budget 2022

The Union Budget 2022, presented by the Hon’ble Finance Minister, explored many important changes in the Income Tax Law but the biggest amendment was the introduction of a new type of return of income.

Over the last few years the time limit for filing a return of income and revised return of income was reduced from 2 years from the end of the Financial Year, to 6 months from the end of the Financial Year. Without the extended time of filing the return, the only avenue left to Assessees to seek an opportunity to file a return was a petition u/s 119(2)(b) to the appropriate authority.

However, with the introduction of the Updated Return u/s 139(8A) in Union Budget 2022, the rules of the game have been completely changed. The time period an opportunity to file a return of income has now been extended, but with some specific conditions and on payment of a penalty.

Who can file an updated return?

1. An Assessee who has filed a return of income u/s 139(1) or

2. Belated Return u/s 139(4) or

3. Revised return u/s 139(5) or

4. An Assessee who has not filed a return of income at all

What is the Extended Time Period?

An Assessee can now file the updated return of income upto 24 months from the end of the relevant Assessment Year.

Eg: For FY 2021-22 (AY 22-23), the Regular Due date is – 31/7/2022; Belated Due date is 31/12/2022 and the updated return due date is 31/3/2025.

Who Cannot File an Updated Return?

However, the following persons cannot take the benefit of this new updated return:

1) A person filing a return of loss

2) A person reducing his tax liability (as compared to the original return of income filed)

3) A person claiming a refund or claiming an increased amount of refund

4) Where an updated return of income has already been filed – Only 1 updated return permitted for each year

5) In case search has been initiated u/132 or survey has been initiated u/s 133 for such person

6) Where any assessment or re-assessment has been initiated for that particular year or Income Tax has information on PMLA or Black Money activities in that person’s regard

7) Where intimation has been received u/s 90/90A prior to filing return us 139(8A)

8) Where prosecution has been initiated for that relevant assessment year

Hence, from the above it is clear that unless you are an Assessee who is offering income and/or paying additional taxes to the Income Tax Department, you cannot take the benefit of this section. There is bar on claiming additional refund/additional losses and reducing the tax payable, in the return filed u/s 139(8A).

Payment of Penalty to File Updated Return

The New Updated Return mandates a payment of penalty ranging from 25% to 50% depending on when the Assessee files the return of income.

If the Return is filed within 12 months from end of Relevant AY– 25% of Additional Tax Payable (including interest).

If the Return is filed after 12 months but before 24 months from end of Relevant AY– 50% of Additional Tax Payable (including interest).

Beyond 24 months from end of Relevant AY – No Return can be filed at all

Hence, understanding the same with a practical example for FY 2021-22 (AY 2022-23). The Regular Due date is 31/7/2022; Belated Due date is 31/12/2022.

Any return filed after 31/12/2022 upto 31/03/2024, the penalty payable is 25% of the additional tax + interest payable.

Any return filed after 31/3/2024 upto 31/3/2025, the penalty payable is 50% of the additional tax + interest payable.

Conclusion – The Updated Return is a New Opportunity because Department now have information

The Income Tax Department now, with the advent of the AIS and TIS possess information about Assessees that earlier was very difficult to collect, including details such as Shares/Mutual Funds Sold and Savings Bank Interest earned from Banks. The likelihood the Income Tax will now issue notices (including re-opening notices for earlier year) to defaulters who have not filed or not disclosed their incomes properly is much higher and likely to happen.

Hence, though the penal provisions for filing an updated return u/s 139(8A) can be steep, it is still a great opportunity for Assessee’s to comply by disclosing and filing their proper incomes earned.