ITR-U filing deadline on March 31: How taxpayers can avoid 50% extra tax with timely submission

Taxpayers in India are racing against time to file their updated Income Tax Returns (ITR-U) for the financial year 2022-23 (assessment year 2023-24) before the critical deadline of March 31, 2025. The Income Tax Department has strongly urged individuals to ensure timely filing, emphasising that returns filed before this date will incur a lower additional tax rate of 25%. In contrast, missing the deadline will result in a significant financial impact, as the additional tax burden will rise to 50%, along with interest charges. 

The ITR-U provision, introduced in 2022, offers taxpayers the flexibility to correct any errors or disclose previously unreported income in their original filed returns. This updated return allows for amendments within two years of the relevant assessment year, enabling taxpayers to rectify oversights without severe penalties. As the filing deadline looms, the department has issued a reminder: 'Please file Updated ITR for AY 2023-2024 by March 31st, 2025 to avail lower additional tax of 25% and Interest. Don’t delay, file today!'

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In his written response to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary reported that as of February 28, 2025, a sum of 4.64 lakh updated ITRs were submitted, resulting in tax payments amounting to Rs 431.20 crore.

Time Limit

Taxpayers have a two-year window to update their returns through the ITR-U filing system. However, the tax implications depend on the timing:

Before March 31, 2025: 25% additional tax + interest
After March 31, 2025: 50% additional tax + interest

The urgency to meet this deadline stems not only from avoiding the 50% extra tax but also from the broader implications of timely compliance with tax regulations. Taxpayers are advised to act promptly to leverage the current provisions effectively. With the impending changes in the filing period and associated penalties, the decision to file on time is not just economically prudent, but also a step towards maintaining fiscal responsibility.

New rules

Starting from April 2025, the Centre plans to extend the ITR-U filing period from two years to four years, granting taxpayers more time to report undisclosed income. However, this extended period will also be accompanied by higher penalty taxes, underscoring the importance of prompt filing. Over the past four years, taxpayers have filed more than 90 lakh updated ITRs, contributing a substantial Rs 9,118 crore to the national exchequer. This highlights the ITR-U's significant role in facilitating voluntary compliance and revenue collection.

The ITR-U is not just for rectifying previous returns; it also serves as an option for those who missed filing their original or belated returns. This flexibility ensures that taxpayers can still meet their tax obligations and avoid harsher penalties. As taxpayers consider their options, the Income Tax Department continues to promote the advantages of filing before the March 31 deadline to benefit from the lower additional tax rate and reduce financial strain.