Tax dept starts online filing of updated returns: Know what's the process

Business Standard

31-07-2025

The Income-Tax Department has enabled online filing of updated returns (ITR-U) for assessment years (AY) 2021–22 and 2022–23 through ITR-1 and ITR-2. The facility allows taxpayers to fix omissions or errors made in earlier filings, be it unreported income, incorrect tax rates, or missing returns altogether.
Here's what you should know about filing updated tax returns.
What is an Updated Return (ITR-U)?
Introduced in Budget 2022, ITR-U allows individuals and companies to voluntarily declare additional income not previously reported, even if no original return was filed. However, it cannot be used to claim refunds or reduce tax liability; it is purely meant for paying up dues.
'ITR-U is a final chance for taxpayers to correct errors and declare undisclosed income before the tax department catches it. It comes with a cost, but avoids harsher penalties or prosecution,' said Ritika Nayyar, partner at Singhania & Co.
What's new this time?
The revised process is more rigorous and 'unlike before, taxpayers now need to submit the full applicable ITR form alongside ITR-U, with detailed financials, not just the additional income,' said Sandeep Bhalla, partner at Dhruva Advisors. The,
Progressive penalty:
25 per cent extra tax if filed within 12 months
50 per cent for 12–24 months
60 per cent for 24–36 months
70 per cent for 36–48 months
New disclosures: More details on income source, reason for revision, and verification
One-time filing per AY: You can't revise your updated return later
Who should file it?
You may consider filing ITR-U if:
-You missed filing your return earlier
-You underreported income from salary, interest, rent, or capital gains
-You used the wrong income head or tax rate
-You want to avoid scrutiny due to AIS/TIS mismatches
But not everyone qualifies. Bhalla notes that updated returns cannot be filed if:
A search, survey or reassessment is underway
Proceedings are active under laws like PMLA or Benami Act
Key precautions to avoid trouble
Ensure accuracy: Match details with AIS, TIS, and Form 26AS
Document everything: Keep proof for at least 7 years
Act before proceedings start: If notices are issued, you lose this window
While the tax hit can be steep, up to 70 per cent of additional tax and interest, the updated return window gives taxpayers a valuable last chance to come clean. As Nayyar says, 'It's not a loophole, but a legal safety net, use it wisely, and only if needed.'