What is the ITR-U Form and How to File ITR-U?

Have you ever made a mistake in your income tax^* return (ITR) and wished you could correct it? Have you ever missed the deadline for filing your ITR and faced penalties or interest? Have you ever realised that you have yet to report some income or claim some deductions under section 80C in your ITR?
 

You are not alone if you answer yes to any of these questions. Many taxpayers face these situations every year and pay more tax than they should or lose out on refunds or benefits. But what if we tell you there is a way to update your ITR and rectify your errors or omissions without hassle or litigation?
 

The government has introduced a new concept of updated returns (ITR-U) in the Union Budget 2022.

What is ITR-U?

ITR-U stands for Income Tax Return - Updated. This form enables you to update your income tax return by reporting any additional income or correcting any mistakes you have made in your original, past, or revised return. The reason for introducing the ITR-U form is to help taxpayers to meet their tax obligations more effectively, avoiding legal consequences. It also helps the government to collect more revenue from undisclosed or under-reported income.

The deadline for submitting ITR-U is 24 months after the conclusion of the applicable assessment year. ITR-U form is divided into two parts— A & B.
 

Part A is the general information section. Here, you must provide your personal details, such as PAN, name, Aadhaar number, assessment year, and more. You also have to mention whether you have filed a return previously for this assessment year, and if yes, then under which section and with which acknowledgement number and date.
 

Part B is the updated income tax return section, where you must fill out the ITR form you chose in Part A. You have to report your income from various heads. Also, claim deductions under various sections, such as 80C, 80D, 80G, etc. You must also disclose your assets and liabilities if your total income exceeds ₹50 lakhs.

Time Limit to File ITR-U

Here are the time-related ITR-U conditions:
 

You can file ITR-U for up to two years from the end of the relevant assessment year. For example, the return of FY 2022-23 can be updated till March 31, 2025.

How to Calculate ITR-U Return

If you want to compute your income tax on an updated return (ITR-U), you need to follow these steps:

• Compute your total earnings from all sources, such as salary, business, capital gains, house property, etc.
• Deduct any deductions or exemptions you are eligible for, such as 80C, 80D, 80G, etc.
• Check the ITR-U applicability for tax rates. Then, apply the applicable tax rates on your taxable income to get your tax payable.
• Add any interest or late-filing fees you may have to pay to file the updated ITR-U return.
• Add the additional tax you must pay for taking the benefit of section 139 (8A) of the Income Tax Act. The additional tax is 25% or 50% of the tax amount, depending on when you file the ITR-U.
• Subtract any tax deducted at source (TDS), tax collected at source (TCS), advance tax, or tax relief you have already paid or claimed.
• The result is your net tax liability or refund that you have to pay or receive.

Who Can File ITR-U?

Regarding ITR-U eligibility, anyone who has made an error or omitted specific income details in any of the following returns can file an updated return:
 

• Original return of income
• Belated return
• Revised return
   

Filing for an updated return is permissible in the following cases:
 

• Did not submit the return
• Missed return filing due date and the deadline for belated return
• Inaccurate income declaration
• Paid tax at the incorrect rate
• Tax paid under the wrong head of income
• To lessen the tax credit under section 115JB/115JC
• To lower the carried forward loss
• To lower the unabsorbed depreciation
   

You can file only one updated return for each assessment year as a taxpayer.

Who Cannot File ITR-U?
 

• ITR-U filing is not available in the following cases:
• The updated return has already been filed.
• Submitting nil return/ loss return
• For claiming/increasing the refund amount
• An updated tax return results in lower tax liability
• Initiation of search proceeding under section 132 against you.
• Conduction of survey under section 133A
• Calling off or seizure of assets, books, or documents by the Income Tax authorities under section 132A.
• Pendency or completion of assessment/reassessment/revision/re-computation.
• If you do not owe any extra tax (when your tax liability is balanced with TDS credit/losses and you do not have any other tax obligations).

Should You Pay Additional Tax When Filing ITR-U?

You may need to pay an extra tax depending on when you file your ITR-U. This additional tax is calculated based on the difference between the tax you owe with the updated return and the tax you owe with the original, late, or revised return.

Here are the rates for this additional tax:

How to File Form ITR-U?

According to Income Tax regulations, you must submit the revised return (ITR-U) alongside an updated version of the relevant ITR form (ITR 1 - 7).

Here are the steps to complete Form ITR-U:

• Enter your PAN, name, address, email ID, mobile number, and date of birth in Part A - Personal Information.
• Enter your Aadhaar number and link it with your PAN if not already done.
• Select your status (individual/HUF/firm/company) and residential status (resident/non-resident) in Part B - Status.
• Select your original/belated/revised ITR form number (ITR 1 – 7) and enter your acknowledgement number and date in Part C - Original/Belated/Revised Return Details.
• Select the reason for filing the updated return from the given options in Part D - Reason for Filing Updated Return.
• Provide the details of additional earnings in each head of income. A detailed break-up of each head is optional.
• Enter the income declared per the original/belated/revised return and the updated income as per the updated return in Part E - Computation of Income and Tax Liability.
• Share the total income. You may find this from ‘Part B-TI’ of the ITR form (1-7) submitted by you.
• Enter the tax payable as per the original/belated/revised and updated returns. The difference between the two is the additional tax payable.
• Enter the details of tax deducted at source (TDS), tax collected at source (TCS), advance tax, and self-assessment tax paid in Part F - Details of Taxes Paid.
• Enter the details of your bank accounts at any time during the previous year in Part G - Bank Account Details.
• Enter your verification details and sign the Part H - Verification declaration.
• Attach the updated version of the ITR form (1-7) along with Form ITR-U and submit it online on the Income Tax portal.

Conclusion

ITR-U is a new form that lets you rectify and update your tax returns for up to two years from the end of the relevant assessment year. It is a voluntary and beneficial option for taxpayers who want to comply with the tax laws and avoid legal consequences. However, it also involves paying an additional tax of 25% or 50% on the additional tax liability along with interest. Therefore, you should file your ITR-U carefully and correctly after considering all the factors and implications.