CBDT Notifies Tax Return Form And The Manner To Furnish Updated Return: EY Analysis

EY Update

This tax alert summarises the key highlights of notification issued by the Central Board of Direct Taxes which amends the Income Tax Rules, 1962 by inserting Rule 12AC which provides for tax return form (Form ITR-U) and the manner for furnishing updated return.

The notification is issued pursuant to the introduction of the new scheme under the Income Tax Laws by Finance Act 2022, which permits all taxpayers to file an 'updated return' within 36 months from the end of the relevant tax year, subject to various conditions.

While furnishing updated return, the taxpayer is also required to pay an additional tax of 25% or 50% on tax and interest due on such updated return while providing for immunity from penalty and prosecution.

The scheme is introduced with the object of providing an opportunity for voluntary compliance by taxpayers in order to rectify errors in the last valid return filed and to reduce litigation.

Though the notification prescribes the new tax return form and the manner in which the updated return can be filed, however, the computation of total updated income and manner of determination of the additional tax liability thereon, especially in cases of refund in original returns, is likely to be clear once the instructions and online utility to furnish such form are also issued by the CBDT.

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