With the Finance Bill 2022 set to become a law, one last chance to revise Income Tax Return (ITR) for Assessment Year 2021-22 (Fiscal Year 2020-21) without any penalty is going to end on March 31. This is also the final opportunity to file the ITR for the same AY but with penalty.

Mistake in filing ITR is nothing abnormal. Some common mistakes include wrong bank details, Incorrect personal information, selecting wrong ITR Form, mismatch of income between the ITR and 26AS, missed income or deductions, missed to report & carry forward losses, etc. The Income Tax Department provides an opportunity to assessee and rectify the mistake through revising returns. From the current AY, one can revise the return three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Because of Covid, the government extended the due date for filing returns to December 31. So, revised returns can be filed till March 31 or before the assessment whichever is earlier.

Sujit Bangar, Founder of Taxbuddy.com says: “Taxpayers should not wait till March 31. It’s better to revise at the earliest date possible to correct errors.”

Updating of returns

Now, Finance Bill 2022 prescribes taxpayers can update (revise) the return within two years from the end of AY but with some conditions. Ved Jain, former President of the Institute of Chartered Accountants of India (ICAI), says: “Updating of tax return as per the new provisions being introduced by Finance Bill, 2022 will attract additional liability of 25 per cent (50 per cent in second year).”

To make adequate use of the information available with the CBDT, an option to file an updated return has now been proposed to be provided to the taxpayers. This will help taxpayers to make voluntary compliance and declare additional income/ discharge additional tax liability in cases, where, by way of Annual Information Statement (AIS) or otherwise, taxpayers come to know of any income, which could not be offered to tax at the time of filing of the original return or where no return has been filed.

Accordingly, an updated return can be filed within a period of 24 months, from end of relevant AY by paying an additional tax which will be equivalent to 25 per cent of aggregate tax and interest in case the updated return is filed within 12 months from end of relevant AY. The additional tax will be payable at the rate of 50 per cent, if updated ITR is filed after 12 months, but before 24 months from end of relevant AY.

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Currently, if the department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return, Finance Minister Nirmala Sitharaman had said while presenting the budget for Fiscal Year 2022-23.

Tax experts say though there is an option, still it would be better if one revised return before the end of AY. In case of not filing the return, taxpayers will have to pay TDS at a higher rate beside other action. That is why Jain says, “make sure to file your tax return if not already filed.”

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