Union Budget 2022: The missing piece of updated return under section 139(8A) of Income Tax Act, 1961

KEVAL SONECHA – Partner, Sonecha & Amlani

Union Budget, 2022 proposes to provide an opportunity to tax payers to correct omissions or errors by filing “Updated Return” within 2 years from the end of relevant assessment year along with additional payment of tax and incidental interest. The objective of introducing this facility is to promote voluntary tax compliance and reduce litigation. The existing provisions of Income Tax provide for belated filing before 3 months from the end of relevant assessment year.

Hence, after 9 months from the end of a particular financial year, ITR cannot be filed. If a tax payer is provided sufficient time to correct/rectify a mistake or omission, then it may reduce litigation and needless to mention that IT department will have logical data to arrive to correct conclusion including additional revenue.

Therefore, with this objective the new Section 139(8A) and Section 140B is proposed to be introduced in Income Tax Act, 1961. The question is whether the conditions prescribed in the new section will really help the Government to achieve the desired objective considering the trends of various scheme issued by Government in past. Let’s look into the conditions of Section 139(8A) and Section 140B of Income Tax Act, 1961.

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