ITRs in Four Years
The Indian government’s initiative to promote voluntary tax compliance through Updated Income Tax Returns (ITR-U) has yielded significant results. Over the past four years, more than 90 lakh updated ITRs have been filed, contributing ₹9,118 crore in additional tax revenue to the exchequer. This highlights the success of the ITR-U scheme in ensuring taxpayers can rectify their earlier filings without severe penalties.
Breakdown of Updated ITR Filings and Tax Collections
The data shared by Minister of State for Finance Pankaj Chaudhary in a written reply in the Lok Sabha reveals the following key statistics:
| Assessment Year (AY) | Number of ITR-Us Filed | Additional Tax Collected |
| AY 2024-25 (Till Feb 28) | 4.64 lakh | ₹431.20 crore |
| AY 2023-24 | 29.79 lakh | ₹2,947 crore |
| AY 2022-23 | 40.07 lakh | ₹3,940 crore |
| AY 2021-22 | 17.24 lakh | ₹1,799.76 crore |
| Total (AY 2021-22 to AY 2024-25) | 91.76 lakh | ₹9,118 crore |
What is an Updated ITR (ITR-U)?
To encourage voluntary compliance, the government introduced the Updated Income Tax Return (ITR-U) scheme in 2022. This provision allows taxpayers to file an updated return within two years from the end of the relevant assessment year by paying additional tax.
Upcoming Change: Time Limit Extension for ITR-U
The Finance Bill 2025 proposes a crucial amendment to the ITR-U scheme. The time limit for filing updated returns will be extended from 2 years to 4 years from the relevant assessment year. This extended window will provide taxpayers with more flexibility to rectify errors, disclose missed income, or correct previously filed returns without facing severe penalties.
Why Was the ITR-U Scheme Introduced?
The ITR-U scheme aims to:
- Encourage taxpayers to voluntarily disclose unreported income.
- Provide an opportunity to correct genuine errors or omissions in previously filed returns.
- Reduce tax evasion by allowing taxpayers to comply without fear of immediate scrutiny.
Key Rules for Filing an Updated ITR
- Eligibility: Any taxpayer (individual, firm, or company) who has omitted or misreported income can file an updated return.
- Time Frame: Under the current rule, taxpayers can file ITR-U within 2 years from the end of the relevant assessment year. Post Finance Bill 2025 approval, this period will extend to 4 years.
- Additional Tax Payment: Filing an updated return requires paying additional tax:
- Within 12 months: 25% additional tax on the payable amount.
- Between 12-24 months: 50% additional tax on the payable amount.
Benefits of Filing an Updated ITR
- Helps avoid notices or scrutiny from the Income Tax Department.
- Enables taxpayers to rectify genuine mistakes.
- Ensures compliance with minimal penalties compared to severe fines for non-disclosure.
Conclusion
The success of the ITR-U scheme reflects a positive step in promoting voluntary compliance and transparency in tax filings. With over ₹9,118 crore collected from 90 lakh+ updated ITRs in just four years, the initiative has proven effective. The proposed extension of the filing period to 4 years is expected to further encourage taxpayers to disclose unreported income and contribute to national revenue growth.
For taxpayers, this extended window offers an excellent opportunity to ensure compliance and avoid hefty penalties. If you have missed reporting income or made an error in your previous returns, utilizing the ITR-U option can save you from future complications.
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