Listen to this article in summarized format
Updated return is filed by the individuals to correct the omissions made in the original tax filing and the due date to file revised ITR has expired.
Income Tax Guide
Income Tax Union Budget FY 2026-27 LiveIncome Tax Slabs FY 2025-26Income Tax Calculator 2025
Budget 2026 has made two proposals regarding updated returns. The first proposal is allowing filing of updated returns in case of loss, provided the condition is satisfied. The second proposal is to allow filing of updated returns after issuance of notice.
Who can file updated ITR in case of loss?
As per the Budget 2026 proposal, Section 263 (6) will be amended to allow filing of Updated return if taxpayer reduces the loss amount in comparison to the loss amount claimed in the original filed return.
Here is an example to understand this:
Suppose the tax payer claimed a loss of Rs 5 lakh in the original ITR filed within the due date. Now, the taxpayer wants to reduce the loss amount to Rs 3 lakh. In such case, an updated return can be filed. Earlier, updated return was allowed to be filed only if the updated return resulted in a return of income by removing the claim of loss from originally filed ITR.
Also read: 7 ways income tax filing will be impacted after Budget 2026
“Where the taxpayer had filed a return of loss, the earlier provisions allowed filing an updated tax return only if the updated tax return resulted in a positive return of income. The Budget 2026 proposes to allow the taxpayers to reduce the quantum of loss reported in original tax return, thereby, allowing them an opportunity to report correct losses by rectifying the excess amount reported earlier which otherwise may have been disallowed by the tax authorities and resulted in imposition of interest and penalties.”– Says Shalini Jain, Tax Partner, EY India
Can updated return be filed if loss amount has increased?
No, Updated return cannot be filed if loss amount has increased. There is no such relaxation proposed in the budget.
Who will be allowed to file updated returns after issuance of notice?
According to the Budget documents, updated return may also be allowed in such cases where proceedings of reassessment have been initiated and notice of reassessment has been issued under section 280 of the Act as the same would reduce litigation
What will be the time-limit to file updated return after issuance of notice?
An updated return may be furnished by a person for the relevant tax year in pursuance of a notice under section 280 within such period as specified in the said notice and in such a case assessee shall be precluded from filing return of income in pursuance of notice under section 280 in any other manner.
What will be the additional tax payable on filing updated tax return?
According to budget document, an updated return is filed in pursuance of a notice issued under section 280 within the period specified in the said notice, the additional income-tax payable shall be increased by a further sum of 10 % of the aggregate of tax and interest payable on account of furnishing the updated return. It is further proposed that where additional income-tax is paid as per proposed additional income-tax, the income on which such additional income-tax is paid shall not form the basis of imposition of penalty under section 439.
When will the new law come into effect?
The new law will come into effect from April 1, 2026 under the Income tax Act 2025. However, similar amendments are proposed to be made in Income tax Act 1961 to align with the proposed amendments. Under the old Income tax act, this will come into effect from March 1, 2026.
What is an updated return?
An updated return is a type of tax return that allows taxpayers to file their returns with more time by paying additional tax amount as prescribed in the law. It is intended to encourage voluntary tax compliance. An updated return can be filed by any person, except in certain circumstances, regardless of whether they have previously filed an original, belated, or revised return for the relevant tax year or not. The filing of an updated return is optional for the taxpayer.
What is the time limit for filing an updated return?
The time limit provided for filing an updated return is 48 months from the end of the relevant tax year. In the financial year 2025-26, a person can file an updated return for tax year 2024-25, 2023-24, 2022-23, 2021-22.
Penalty applicable on filing ITR-U
A penalty applies to filing an updated return using ITR-U, depending on when you file the updated ITR.The additional tax payable on updated returns are 25%, 50%, 60%, and 70% applicable in the first, second, third, and fourth years, respectively.
According to income tax rules, 25% of an additional tax on aggregate tax and interest is levied if the updated ITR is filed within 12 months from the end of the assessment year. This will hike to 50% as an additional tax if the updated return is filed between 12 months and 24 months. If the updated return is filed between 24 months and 36 months, then 60% as an additional tax is payable by the taxpayer.
aniltikotekar4sme.com 