The government has extended the deadline for filing an updated Income Tax Return (ITR-U) from 24 months to 48 months, allowing taxpayers more time to correct their tax filings. This move, announced by Union Finance Minister Nirmala Sitharaman during Budget 2025, is aimed at encouraging voluntary tax compliance and reducing disputes between the tax department and taxpayers.

What is ITR-U?

Introduced in Budget 2022, ITR-U allows taxpayers to update their income tax returns if they have omitted or misreported any income. This helps taxpayers avoid penalties or legal action from the tax department.

Why was the Deadline Extended?

Since the introduction of ITR-U, around 90 lakh taxpayers have voluntarily updated their income and paid additional taxes. Given this overwhelming response, the government decided to extend the deadline to 48 months in Budget 2025.

Eligibility and Restrictions for Filing ITR-U

Taxpayers can file ITR-U even if they previously filed a loss return under section 139(3), but it should not be used to claim losses. However, certain restrictions apply:

• ITR-U cannot be filed if it results in lower tax liability or an income tax refund.

• Cases involving surveys, searches, or requisition of documents by the tax department are not eligible.

• If a taxpayer is undergoing assessment, reassessment, or prosecution proceedings, they cannot file ITR-U.

Thus, ITR-U is specifically designed for those who need to report unclaimed income and pay due taxes, not for claiming refunds.

Benefits of Filing an Updated Return

By opting for ITR-U, taxpayers can:

• Avoid penalties and legal actions from the tax department.

• Ensure compliance and maintain a clean tax record.

• Reduce litigation and disputes with tax authorities.

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