Time limit for filing updated tax returns extended from two years to four years in Budget 2025

Fast forward to Budget 2025-26, and the tax landscape looks starkly different from that in 2014.

Finance Minister Nirmala Sitharaman has proposed to extend the time limit to file updated returns for any assessment year from the current limit of two years to four years.

The updated return facility, launched in 2022, allows taxpayers to voluntarily correct any mistakes or omissions in the original or belated return. This initiative promotes transparency and compliance, and its impact is evident: nearly 90 lakh taxpayers have already utilised this facility to update their incomes and pay additional taxes.

Gaurav Singh Parmar, Associate Director, Fincorpit Consulting, says, “The new time limit set for filing updated returns gives an appropriate buffer for the taxpayers to amend their mistakes and in compliance matters.”

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Additional tax on updated returns

The additional tax payable shall be 60 percent of the aggregate of tax and interest payable on additional income for filing updated returns during the period of 24 months to 36 months from the end of the relevant assessment year.

Additional tax payable shall be 70 percent of the aggregate of tax and interest payable for filing updated returns during the period of 36 months to 48 months from the end of the relevant assessment year.

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Another chance to ensure tax compliance

Filing updated returns is a relatively new flexibility under Section 139(8A) which allows an updated return to be filed by a taxpayer even if the person has already filed the original, belated or revised return for the relevant assessment year. This option allows taxpayers to rectify errors or include additional details that were missed in the original ITRs, and thus avoid penalties or litigation.

You need to enter all the details in a specified form—ITR Form U—for filing an updated return. In addition, you will have to specify the reason behind the need to file an updated return. For instance, missing the original due date, wrong choice of income head, errors in disclosed income figures in the original returns and so on.

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Be aware of the restrictions, penalties

You cannot file an updated return to lower the tax liability in the original return and claim refunds. That is, if you want to revise your returns to show lower income or set off your losses against any gains, you will not be able to do so. Likewise, if any search, survey or assessment is underway, you cannot file updated returns.