Union Budget 2025: Time Limit to file Updated Return extended

The Union Budget 2025 presented in the parliament today by Finance Minister Nirmala Sitharaman brought major changes in direct taxation. Changes from introduction of new tax rate slab, increase in basic exemption limit, enhancement in tax rebate limit under section 87A to extending the time-limit for filing updated returns.

Extending the Time-Limit to file the Updated Return

The Time Limit to file ITR U (Updated Income Tax Return) has been extended to 4 years from existing 2 years. Additional Income Tax on Aggregate Tax and Interest has also been increased.

Relevant Portion of Finance Bill:

Relevant Portion of Budget Memo:

Sub-section (8A) of section 139 of the Act, relates to furnishing of updated return. As per the present provisions, an updated return can be filed upto 24 months from the end of the relevant assessment year. The facility of updated return has promoted voluntary compliance against payment of additional income-tax of 25% of aggregate of tax and interest payable for updated return filed upto 12months from the end of the relevant assessment year. For updated return filed after expiry of 12 months and upto 24 months from the end of the relevant assessment year, the additional income-tax of 50% of
aggregate of tax and interest is to be paid.

To further encourage voluntary compliance, it is proposed to amend the aforementioned sub-section to increase the time limit for filing an updated return from existing 24 months to 48 months from the end of the relevant assessment year.

Rate of additional income-tax payable for updated return filed after expiry of 24 months and upto 36 months from the end of the relevant assessment year shall be 60% of aggregate of tax and interest payable. The additional income-tax payable for updated return filed after expiry of 36 months and upto 48 months from the end of the relevant assessment year shall be 70% of aggregate of tax and interest payable.

It is further proposed to provide that no updated return shall be furnished by any person where any notice to show-cause under section 148A of the Act has been issued in his case after thirty-six months from the end of the relevant assessment year.

However, if an order is issued under sub-section (3) of section 148A of the Act determining that it is not a suitable case for issuing notice under section 148 of the Act, an updated return may be filed up to 48 months after the end of the relevant assessment year.

These amendments will take effect from the 1st day of April, 2025.