Budget: Some taxpayers cannot update tax returns under new rule. Details here
Premium- Taxpayers can file the updated returns within two years, on payment of additional tax, from the end of the relevant assessment year.
Finance Minister Nirmala Sitharaman on Tuesday announced a new rule relating to income tax returns while presenting the Budget for the next financial year. The new rule will provide a one-time window to correct omissions in income tax returns (ITRs) filed.
Taxpayers can file the updated returns within two years, on payment of additional tax, from the end of the relevant assessment year. The additional tax will be at 25-50% on the tax and interest due on the additional income furnished while filing the updated return.
"The income tax department has established a robust framework of reporting of taxpayers' transactions. In this context, some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year," Finance Minister Nirmala Sitharaman said in her Budget speech.
However, according to the Budget memorandum, some taxpayers will be ineligible to file updated returns under the new provision.
The proposed rule will not apply if the updated return is a return of a loss or has the effect of decreasing the total tax liability determined on the basis of return furnished.
Also, the provision will not apply
1) If a search or survey has been initiated against individual taxpayers
2) A notice has been issued to the effect that any money, bullion, jewellery or valuable article or thing, seized or requisitioned.
“Concerns had been expressed by corporate taxpayers on the limited time available for revising tax returns, acknowledging a part of the concern the Finance Bill has proposed an extended timeline for an updated tax return. However, what the FM did not mention in her speech is that the same would come with an additional tax at 25%-50% on the tax and interest due on the additional income furnished would be required to be paid. While this does provide one more opportunity to taxpayers to ensure comprehensive reporting, is the additional tax fair and whether it would encourage voluntary tax compliance would remain to be seen," said Pranay Bhatia, Partner and Leader - Tax and Regulatory Services, BDO India
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