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Budget 2022: You Can Update Your ITR Within 2 Years, What Does This Mean?
The income tax reporting requirements for normal taxpayers have been tightened in Budget 2022. Taxpayers will now be able to file an updated tax return if they failed to declare specific income to the IRS while completing their initial return. They can pay an extra tax to update their income tax returns (ITR) within two years after the end of the relevant assessment year. While updating the ITR, it is important to note that an additional tax will be paid on the additional income.
What Will Change After Budget 2022 Under the New ITR Rule?
Individual taxpayers have until December 31 of the relevant fiscal year to file an amended or late return, according to current income tax legislation. This extended deadline for filing an amended return may not be sufficient for everyone. Budget 2022 included a provision extending the deadline for filing late income tax returns in order to encourage more people to do so.
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Explained: The Revised Income Tax Filing Norm
To give taxpayers extra time to file updated or late income tax returns, the Union Budget 2022 suggested adding a new sub-section (8A) to Section 139 of the Income Tax Act, 1961. If a taxpayer fails to declare income to tax within two years of the end of the relevant assessment year, the new law will give them two years from the end of the relevant assessment year to do so.
The Budget memorandum stated, “It is proposed to add a new provision in section 139 of the Act for any individual to file an updated report of income, whether he has made a return before for the relevant assessment year or not.”
How much do you have to pay if you file your ITR late or revised?
If taxpayers file a belated return within a year of the end of the applicable assessment year, they will be charged a 25% annual penalty. If a tax filer updates their returns after a year but before two years, an additional tax of 50% is planned in Budget 2022. On the tax and interest owing on the additional income reported in the amended return, the additional tax is required.
It should be noted that taxpayers will not be allowed to use this service if the amended return results in a lower income tax burden or refund than the initial tax return.
How the New ITR Filing Norm Will Benefit Taxpayers
The newly proposed law will assist income taxpayers in avoiding penalties for underreporting or misreporting their earnings. “The proposal for an updated return for a period longer than that provided in the existing provisions of the Income-tax Act would, on the one hand, bring the use of huge data with the IT Department to a logical conclusion, resulting in additional revenue realisation, and, on the other hand, it will facilitate ease of compliance for the taxpayer in a litigation-free environment,” according to the Budget memorandum.
The most important benefit of this provision is that tax payers will be relieved of their fear of penalties and prosecution because they will be able to update ITRs to reflect income that was inadvertently missed for the previous two years. We must understand that if an ITR was not submitted at all in a previous year, we will not be able to use the option of revising the ITR to report missing income.”