ITR-U Explained: What Is an Updated Return, and When Should Taxpayers Use It?

The Income Tax Act introduced the concept of an Updated Return (ITR-U) through the Finance Act, 2022, allowing taxpayers to voluntarily correct errors or omissions in previously filed returns. ITR-U can be filed even where no return was originally submitted, subject to conditions.

The provision aims to promote voluntary compliance by giving taxpayers a second chance to disclose income that was missed, wrongly reported, or underreported in earlier filings, without waiting for departmental action.

What is ITR-U, who can file it, and in which situations does the law permit or restrict its use?

An Updated Return (ITR-U) can now be filed under Section 139(8A) within a period of 24 months from the end of the relevant assessment year. It can be used to declare income that was missed earlier, correct incorrect heads of income, rectify wrong deductions or exemptions claimed and to file a return where no return was filed earlier, etc.

However, ITR-U cannot be used to claim or enhance a refund, to reduce tax liability, to report a loss or increase an existing loss, revise returns where assessment, reassessment, search, or survey proceedings are initiated, revise returns where assessment, reassessment, search, or survey proceedings are initiated.

Filing ITR-U requires payment of an additional tax of 25% (if filed within 12 months), or additional tax of 50% (if filed after 12 months but within 24 months),
along with applicable interest.

Therefore, taxpayers need to know that ITR-U is not a substitute for a revised return. It is a compliance-driven provision designed only for upward correction of income and tax.

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