Income Tax Update: ITR-U Filing Deadline Extended to 48 Months

ITR-U

Income Tax Update: ITR-U Filing Deadline Extended to 48 Months

ITR-U

The Indian government has extended the deadline for filing updated income tax returns (ITR-U) from 24 months to 48 months. This change, proposed in Budget 2025 by Finance Minister Nirmala Sitharaman, allows taxpayers more time to rectify errors, disclose omitted income, and comply with tax regulations.

Understanding ITR-U and Section 139(8A)

Introduced in 2022, the updated return facility under Section 139(8A) of the Income Tax Act, 1961, enables taxpayers to correct inaccuracies in previously filed returns or file a return if they had missed doing so. It applies in cases where income was omitted, losses or refunds were misrepresented, or the required threshold for filing a return was exceeded but no return was submitted.

With nearly 90 lakh taxpayers voluntarily updating their income and paying additional taxes since its introduction, the government has now expanded the timeframe to encourage further compliance.

Key Highlights of the Extended ITR-U Filing Timeline

  • Time Limit Extended: The window for filing an updated return has been extended from 24 months to 48 months from the end of the relevant assessment year.

  • Additional Tax Payable: Taxpayers filing an updated return must pay an additional tax, which increases over time:

    • Within 12 months: 25% of the total tax and interest due.

    • Within 24 months: 50% of the total tax and interest due.

    • Within 36 months: 60% of the total tax and interest due.

    • Within 48 months: 70% of the total tax and interest due.

  • Example: For the financial year 2023-24, the updated return can now be filed until March 31, 2029, instead of March 31, 2027.

How to File ITR-U

To file an updated return, follow these steps:

  1. Download Form ITR-U from the Income Tax Department’s website.

  2. Log in to the e-filing portal and select “Updated Return (ITR-U).”

  3. Enter the necessary details, including additional income and tax payable.

  4. Calculate and pay any applicable additional tax.

  5. Submit the form and verify the return using Aadhaar OTP, net banking, or DSC.

Restrictions on Filing ITR-U

Certain taxpayers are not eligible to file ITR-U, including those who:

  • Have already filed a revised return.

  • Intend to report a loss or zero income.

  • Seek to modify a previously claimed refund.

  • Aim to reduce their tax liability.

  • Are under investigation or assessment under Sections 132, 133A, or 132A.

  • Have no additional tax liability due to TDS or losses.

Impact on Taxpayers

Certain taxpayers are not eligible to file ITR-U, including those who:

  • Have already filed a revised return.

  • Intend to report a loss or zero income.

  • Seek to modify a previously claimed refund.

  • Aim to reduce their tax liability.

  • Are under investigation or assessment under Sections 132, 133A, or 132A.

  • Have no additional tax liability due to TDS or losses.

While this extension promotes voluntary compliance, the steep additional tax—ranging from 25% to 70%—may pose a significant financial burden. Many experts believe that a uniform 25% additional tax would have been sufficient as a deterrent while still encouraging timely compliance.

Nonetheless, this amendment provides a crucial opportunity for taxpayers to rectify past errors and adhere to tax laws without severe penalties. Staying informed about these changes and ensuring accurate tax filing will help individuals and businesses maintain compliance with evolving tax regulations.

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Understanding ITR Filing Requirements for NRIs in India

NRIs

Understanding ITR Filing Requirements for NRIs in India

NRIs

As a Non-Resident Indian (NRI), you might often wonder if filing an Income Tax Return (ITR) in India is necessary. While tax regulations can be complex, this article simplifies the process and answers the key question: “When is an NRI required to file an ITR in India?”

A. Understanding Your Residential Status for Tax Purposes

Your residential status is crucial in determining your tax obligations in India. The Income Tax Act classifies individuals as Resident, Non-Resident (NR), or Not Ordinarily Resident (NOR), based on the amount of time spent in India over a year.

To be considered a Non-Resident Indian (NRI), you must satisfy one of the following conditions:

  • You have stayed in India for less than 182 days during the financial year.
  • You have stayed in India for less than 60 days during the current financial year and for less than 365 days during the preceding four financial years.

Meeting either of these conditions means you’re classified as an NRI under Indian tax laws.

NRI

B. What Types of Income Are Taxable for NRIs?

Once you determine your residential status, the next step is understanding which of your earnings are taxable in India. The taxability depends on whether you’re considered a Resident or a Non-Resident:

  • Residents in India: All global income (income earned both in India and abroad) is taxable in India.
  • Non-Residents: Only income earned or accrued in India is taxable. Income earned outside India is not subject to tax in India unless it is brought into India or connected to assets or business operations within India.

Here are examples of income types that may be subject to tax for NRIs in India:

  • Salary Income: Salary received for services rendered in India is taxable, even if paid abroad.
  • Rental Income: Income from properties located in India is taxable.
  • Capital Gains: Profits from selling assets or properties in India are taxable.
  • Interest Income: Earnings from deposits or savings accounts held in India are taxable.

To simplify: Income earned outside India by an NRI is generally not taxable in India, unless directly received in India or related to assets or business in the country.

C. Is Filing an ITR Compulsory for NRIs?

With an understanding of taxable income, the next question is whether NRIs must file an Income Tax Return (ITR) in India. The answer is clear: If your taxable income in India exceeds the basic exemption limit of Rs 2.5 lakhs, you must file an ITR, even if there is no tax due.

In addition to meeting the basic requirement, there are several other reasons why filing ITR is beneficial for NRIs:

  • Claiming a TDS Refund: If tax has been deducted at source (TDS) from your income, you can file an ITR to claim a refund, particularly if your actual tax liability is lower than the TDS deducted.
  • Reporting Your Residential Status: Filing an ITR ensures that your residential status is officially recorded with the Income Tax Department, minimizing the chances of receiving notices for unreported foreign transactions or remittances.
  • Providing Proof of Income: The ITR acknowledgment serves as legal proof of your income in India, even if no tax is payable.
NRI
  • Carrying Forward Losses: If you incur capital losses from selling assets, you can carry those losses forward to offset future taxable income. To do so, ITR must be filed on time.
  • Easing Remittances: Regular ITR filings simplify the process of remitting funds out of India by providing necessary documentation (e.g., Form 15CA/15CB).
  • Eligibility for Loans and Credit Cards: Banks and financial institutions often require ITRs as proof of income when processing loans or credit card applications. Filing ITR regularly can improve your chances of approval.
  • Expert Tax Review: Filing ITR consistently allows experts to review your income and deductions, helping you optimize your tax planning and avoid penalties.
  • Meeting Visa Requirements: Many visa applications require ITRs from prior years. Regular filing ensures that these documents are readily available when needed.

Though it might seem like an additional task, filing an ITR in India has several advantages for NRIs, from claiming refunds to facilitating financial transactions. Understanding when and why you need to file can help you stay compliant with Indian tax laws while enjoying the benefits of timely filings. If you’re unsure about your specific situation, consulting a tax professional can help you meet all necessary requirements.

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Understanding Section 80GGC: Political Donation Deduction & IT Department Verification

Section 80GGC

Understanding Section 80GGC: Political Donation Deduction & IT Department Verification

Section 80GGC

Have You Received an SMS from the Income Tax Department? Here’s What to Do!

The Income Tax Department has started sending SMS notifications to salaried taxpayers who have claimed deductions under Section 80GGC in the last three assessment years (AY 2022-23, 2023-24, and 2024-25). This section of the Income Tax Act, 1961, allows individuals to claim deductions for contributions made to registered political parties or electoral trusts. However, such donations must be made via non-cash modes like cheques, demand drafts, or electronic transfers. This ensures transparency in political funding, as cash contributions are strictly disallowed.

Why the Scrutiny by the IT Department?

The Income Tax Department has identified around 90,000 salaried taxpayers who have incorrectly claimed deductions amounting to approximately ₹1,070 crore in their Income Tax Returns (ITRs). This scrutiny aims to verify the legitimacy of these claims and prevent fraudulent deductions.

Steps to Take If You Have Made a Political Donation

If you have made donations under Section 80GGC in the past three years, ensure that you have the following documents ready for verification:

  • Donation Receipt from the political party or electoral trust.

  • Bank Statement reflecting the transaction.

  • Acknowledgment Letter or Confirmation from the recipient.

Section 80GGC

What If Your 80GGC Deduction Claim Is Correct?

If your donation is legitimate and you have supporting documents, there is no cause for concern. No immediate action is needed, but it is advisable to keep your records organized for future reference.

What If You Made an Error in Claiming the Deduction?

If you mistakenly claimed a deduction under Section 80GGC without making an eligible donation, it is best to rectify the error by filing an updated return. Doing so before March 31, 2025, will help you avoid penalties and legal issues.

Understanding Section 80GGC: Deduction Limits & Eligibility

Section 80GGC enables individuals to claim a tax deduction for donations to political parties or electoral trusts. However, it is important to note the following eligibility criteria and limitations:

Who Can Claim the 80GGC Deduction?

  • Any individual taxpayer, including Hindu Undivided Families (HUFs), Associations of Persons (AOPs), or Bodies of Individuals (BOIs), can claim this deduction.

  • Companies, local authorities, and government-funded artificial juridical persons are not eligible.

  • The deduction can only be availed under the old tax regime.

What Contributions Are Eligible?

  • Donations to registered political parties (under Section 29A of the Representation of the People Act, 1951) or electoral trusts.

  • Payments must be made through banking channels (online transfers, credit/debit cards, cheques, or demand drafts). Cash donations are not eligible for deduction.

Deduction Limits Under Section 80GGC

  • 100% of the donated amount is deductible, subject to the total income limit.

  • The deduction is part of Chapter VIA benefits, meaning it cannot exceed the taxpayer’s total income.

Key Differences Between Section 80GGB and Section 80G

  • Section 80GGB: Applicable to Indian companies making donations to political parties.

  • Section 80GGC: Applicable to individual taxpayers contributing to political parties.

Section 80GGC

Exceptions to the 80GGC Deduction

  • Donations made in cash or kind (e.g., gifts) are not eligible for tax deductions.

  • Individuals who have opted for the new tax regime cannot claim this deduction.

How to Claim a Deduction Under Section 80GGC

The process to claim the deduction is straightforward:

  1. File your ITR under the old tax regime.

  2. Declare the donation amount under Section 80GGC in the relevant section.

  3. Submit supporting documents (receipt, bank statement, party’s PAN/TAN details) during filing.

  4. If you are a salaried individual, inform your employer to include the deduction in Form 16.

To avail of the tax benefits under Section 80GGC, ensure that your donations are legitimate, well-documented, and compliant with tax regulations. Keeping detailed records will help avoid any complications during verification by the Income Tax Department. If you have made an erroneous claim, rectify it promptly to stay compliant and avoid penalties. Stay proactive and ensure your tax filings are in order for a hassle-free experience!

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