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In a move to boost voluntary tax compliance, the Indian government has announced a major relief for taxpayers in Budget 2025. The deadline to file an Updated Income Tax Return (ITR-U) has now been extended from 24 months to 48 months from the end of the relevant assessment year. This gives individuals and businesses more time to rectify past income tax return errors, omissions, or missed filings.
Let’s break down what this change means and how it impacts you.
🔍 What is ITR-U?
Introduced in Budget 2022 under Section 139(8A) of the Income Tax Act, the ITR-U allows taxpayers to:
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Disclose previously unreported income
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Correct errors or omissions in earlier filed returns
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File returns they had initially missed, even if their income crossed the taxable threshold
This facility is especially helpful for those who wish to come clean voluntarily, without facing harsh penalties or scrutiny.
📢 What’s New in Budget 2025?
Recognizing the positive response from over 90 lakh taxpayers who used the ITR-U facility since its launch, Finance Minister Nirmala Sitharaman has now proposed to double the time window to file an updated return—from 24 months to 48 months.
This means you now have up to four years from the end of the relevant assessment year to file or correct your return—subject to payment of additional tax.
💰 Additional Tax Liability for Updated Returns
Filing an ITR-U comes with an additional tax liability, which increases based on how late the return is filed:
| Filing Timeline (Post AY End) | Additional Tax Payable |
|---|---|
| Within 12 months | 25% of tax + interest |
| 12 to 24 months | 50% of tax + interest |
| 24 to 36 months | 60% of tax + interest |
| 36 to 48 months | 70% of tax + interest |
This structure is designed to reward quicker compliance and discourage long delays in disclosure.
✅ How to File ITR-U
Follow these steps to file your updated return:
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Download Form ITR-U from the Income Tax portal.
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Log in to your account and select “File Updated Return (ITR-U).”
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Enter relevant details, including additional income and tax computation.
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Calculate and pay any additional tax liability.
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Submit the return and verify it using Aadhaar OTP, net banking, or DSC.
🚫 Who Cannot File an Updated Return?
Not everyone is eligible to file an ITR-U. You cannot use this facility if:
- You’ve already filed a revised return.
- You’re filing to show a loss or zero income.
- The return reduces your tax liability or increases your refund.
- You’re being tested, retested, or searched and seized under Sections 132, 132A, or 133A.
- No extra tax is payable (e.g., already deducted under TDS or brought forward losses).
💡 Why This Matters
An extension of the ITR-U window to 48 months is a relief in itself for taxpayers, providing:
- A second opportunity to declare income truthfully.
- Shielding against litigation for genuine errors.
- Scope for financial sanitization, particularly for those not knowing about prior filing requirements.
This move emphasizes the government’s transition to trust-based taxation—simplifying compliance while deterring willful non-disclosure.
Bottom Line
If you’ve missed reporting income in a past year or found an error, the longer 48-month ITR-U window provides sufficient time to rectify. However, the later you do this, the more you’ll have to pay—so act sooner to minimize extra tax payments.