Filing income tax returns is a crucial step for every taxpayer. It not only helps in avoiding legal consequences but also enables taxpayers to claim various benefits and exemptions. However, it is not uncommon for taxpayers to make mistakes or omissions while filing their returns. To address such errors and mistakes, taxpayers can file either an updated return or a revised return. While these terms may sound similar, they are different in many ways.
What is an Updated Return? The concept of an updated return was recently introduced in the Union Budget 2022. An updated return allows taxpayers to correct any omissions or errors in their previous income tax return or file a new ITR if they have not filed it previously. The earliest year for filing this type of return is Financial Year 2019-2020, and the period for filing an updated return is 24 months from the end of the relevant assessment year.
An updated return can be used for various purposes, including filing an ITR not filed earlier, making corrections in disclosure in the ITR, reducing income tax credit, fixing or changing the head of income, reducing the carry-forward loss, reducing unabsorbed depreciation, correcting the wrong rate of tax, and others. However, there is a penalty of 25-50% of the tax liability for an updated return.
What is a Revised Return? A revised return, on the other hand, allows taxpayers to only correct any omissions or errors made at the time of filing their original return. This means that it is a revisiting of the previously filed return and putting in the correct information. The period for filing a revised return is three months prior to the end of the relevant assessment year or before the completion of the assessment year, whichever is earlier. Therefore, the last date for filing a revised ITR for FY 2021-22 is December 31, 2022.
The primary goal of a revised return is to provide the taxpayer with an opportunity to correct the inaccurate information they had provided in their original return. There are no penalties for filing a revised return, and taxpayers can file multiple revised returns within the stipulated time period.
Key Differences Between Updated and Revised Returns Both updated and revised returns serve different purposes, and here are some key differences between them:
- Filing of original return: In the case of an updated return, an ITR can be filed even without filing an original return. Whereas, for filing a revised return, filing of the original return is mandatory.
- Period: An updated return can be filed within two years from the end of the relevant assessment year. However, the original return is to be filed within three months prior to the end of the relevant assessment year or before the completion of the assessment year, whichever is earlier.
- Goal: The goal of an updated return is to make it possible for taxpayers to pay additional taxes on the income that was not stated in the relevant return. On the other hand, the goal of a revised return is to provide the taxpayer an opportunity to correct the inaccurate information he had provided in his original return.
- Submission: The updated return can be submitted only once for the relevant financial year. Whereas, in the case of the revised return, there is no restriction on the frequency of submission. Accordingly, revised returns can be filed multiple times within the stipulated time period.
- Income Tax Liability: An updated return can only be filed to raise income, thereby, in case of increased tax liability. However, the revised return can be filed for both an increase in income as well as a decrease in income.
- Refund: In the case of an updated return, the assessee cannot claim any income tax refund. However, he can claim the ITR refund by the filing of revised return.
- Penalty:
There is a penalty of 25-50% of tax liability for an updated return. On the other hand, there are no penalties for filing a revised return.