New Income Tax Update: Extended Timeframe for Filing ITR-U

Income Tax Update: Important Changes for Taxpayers

For those who file income tax returns annually, a significant update has been announced. The Central Board of Direct Taxes (CBDT) has introduced the updated Income Tax Return (ITR-U) form, which will come into effect on April 1, 2025. This new form aims to provide taxpayers with an opportunity to correct any errors in their previous tax filings. The initiative is designed to simplify compliance with tax regulations and rectify mistakes, although it cannot be used to reduce tax liabilities or claim refunds.

Extended Timeframe for Corrections

Under the new regulations, taxpayers will now have 48 months (4 years) to rectify their mistakes, an increase from the previous 24-month period. For instance, if you are filing a tax return for the financial year 2024-25, which corresponds to the assessment year 2025-26, you can submit the ITR-U form until March 31, 2030. This extended timeframe allows taxpayers ample opportunity to correct any inaccuracies.

Who Can File ITR-U?

The ITR-U form is intended for individuals who were unable to file their original tax returns or provided incorrect information regarding their income, tax rates, or income types. This form allows taxpayers to amend their errors but cannot be used to reduce reported income or request refunds. It is strictly for providing additional income information or correcting mistakes.

Filing Process for ITR-U

According to the new rules, the ITR-U form can only be filed after the assessment year has concluded. The deadline for submitting tax returns is July 31. If this date is missed, late submissions can be made until December 31. If the deadline is still not met, the ITR-U form will be the only option available. For example, the basic return for FY 2024-25 must be filed by July 31, 2025. If missed, it can be filed until December 31, 2025, and if that is also missed, the ITR-U can be submitted starting April 1, 2026. Taxpayers must select the appropriate period from a drop-down menu to verify their returns when filing.

Penalties and Timelines

Filing the ITR-U will incur penalties based on how quickly the return is submitted. If filed in the first year, an additional 25% tax and interest will apply. If filed in the second year, this increases to 50%, and in the third year, it rises to 60%. By the fourth year, the penalty will be 70% plus interest. This penalty system encourages taxpayers to correct their mistakes promptly.

Legal Changes and Benefits

The Finance Act of 2025 has amended Section 139(8A), extending the filing deadline for ITR-U from 24 months to 48 months. This change represents a significant step towards making tax filing more straightforward and accurate.