The Income Tax Department is asking taxpayers to submit their updated Income Tax Return (ITR-U) before March 31, 2025, to prevent higher penalties and extra tax obligations. In a post on social media platform X, I-T department said filing on time will incur a lower additional tax of 25%, while filing after the deadline will raise the tax liability to 50% plus interest.
"If applicable, complete these steps and file your Updated ITR for AY 2023-24 by March 31, 2025, to take advantage of a reduced additional tax of 25% plus interest. Avoid last-minute hassle—file early," the post read.
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The Updated Income Tax Return-Update (ITR-U) gives taxpayers the opportunity to voluntarily disclose undisclosed income or correct mistakes in their previously submitted returns. Effective from 2022, this option allows taxpayers to amend their ITR within two years from the assessment year by settling any additional tax liabilities.
The updated tax return can be amended within two years of the assessment year to correct errors without facing steep penalties. With the approaching deadline for filing, the department has cautioned taxpayers to submit their Updated ITR for AY 2023-2024 by March 31st, 2025, in order to benefit from reduced additional tax of 25% and interest charges.
Deadline for Tax Update
Taxpayers are required to update their returns through the ITR-U filing system within a two-year window. However, the tax consequences vary depending on the timing:
Before March 31, 2025: 25% additional tax + interest After March 31, 2025: 50% additional tax + interest
It is crucial to meet this deadline not only to avoid the 50% extra tax but also to ensure compliance with tax regulations. Taxpayers are strongly encouraged to take prompt action to maximize the benefits of the current provisions. Given the upcoming changes in filing periods and penalties, filing on time is not only financially wise but also demonstrates a commitment to responsible fiscal behavior.
New rules for ITR-U from April 1, 2025
In the Budget 2025 announcement, Finance Minister Nirmala Sitharaman revealed the plan to extend the current deadline for filing ITR-U from 24 months to 48 months. The aim of this change is to encourage taxpayers to voluntarily comply with tax regulations.
However, individuals who file their ITR-U after the initial 24-month deadline will be subject to additional penalties. Below are the proposed penalties for late ITR-U filing:
Up to 12 months: 25% additional tax plus interest After 12 months and before 24 months: 50% additional tax plus interest After 24 months and before 36 months: 60% additional tax plus interest After 36 months: 70% additional tax plus interest
ITR-U is not limited to correcting previous returns but also provides an option for taxpayers who missed filing their original or belated returns. This flexibility ensures that taxpayers can fulfill their tax obligations and avoid severe penalties. As taxpayers explore their options, the Income Tax Department continues to emphasize the benefits of filing before the March 31 deadline to take advantage of the lower additional tax rate and reduce financial burden.
In the last four years, more than 90 lakh taxpayers have submitted updated ITRs, contributing a substantial Rs 9,118 crore to the national exchequer. This underscores the significant role of ITR-U in promoting voluntary compliance and revenue collection.