Urgent Reminder: File Your Updated ITR Before March 31, 2025, to Avoid 50% Additional Tax

Introduced in 2022, the option to file an updated ITR (ITR-U) allows taxpayers to submit their returns even after the original deadline has passed.

The Income Tax Department has issued a reminder for taxpayers to file their updated Income Tax Return (ITR-U) before March 31, 2025, to avoid incurring a 50% additional tax penalty. Filing an updated return allows individuals to voluntarily report any previously unreported income or rectify errors in earlier submissions, helping to reduce financial penalties.

What Is an Updated Return and Why Should You File One?

Introduced in 2022, the option to file an updated ITR (ITR-U) allows taxpayers to submit their returns even after the original deadline has passed. This option is available for up to two years from the end of the relevant assessment year, subject to paying additional taxes. This initiative aims to encourage taxpayers to comply with tax regulations voluntarily.

As of February 28, 2025, over 4.64 lakh updated ITRs have been filed for the current assessment year (2024-25), resulting in Rs 431.20 crore in additional taxes. In the previous assessment year (2023-24), more than 29.79 lakh ITR-Us were filed, contributing a total of Rs 2,947 crore in additional tax payments.

Who Can File an Updated Return?

An updated return can be filed by individuals, businesses, and other entities, except in certain specified cases. This option provides an opportunity to correct mistakes or disclose previously unreported income. It is a voluntary measure designed to allow taxpayers to ensure their tax filings are accurate and complete.

Deadlines and Additional Tax Penalties

Taxpayers must file their updated returns within two years from the end of the relevant assessment year. The penalty for additional tax depends on when the updated return is filed:

Before March 31, 2025: If the return is filed within 12 months from the end of the assessment year, the additional tax penalty will be 25% of the total tax and interest due.

After March 31, 2025: Filing between 12 to 24 months after the assessment year results in a 50% additional tax penalty.

After 24 months but before 36 months: The penalty increases to 60% if filed between 24 to 36 months.

After 36 months: If filed after 36 months, the additional tax penalty reaches 70%.

To avoid higher penalties, taxpayers are strongly advised to file their updated returns before March 31, 2025.

Proposed Changes in April 2025

Finance Minister Nirmala Sitharaman has proposed an extension of the current 24-month period for filing an updated return to 48 months (4 years) from the end of the relevant assessment year. This change aims to further encourage voluntary tax compliance, though taxpayers should be aware that filing after the deadline will result in higher penalties.

In a nutshell, filing an updated ITR gives taxpayers a valuable opportunity to rectify previous mistakes or disclose unreported income. To minimize the additional tax penalty, it is crucial to file the updated return before the March 31, 2025, deadline, which will allow taxpayers to pay a lower 25% penalty. Delaying the filing beyond this date will result in higher penalties, so it’s best to act now to avoid unnecessary costs.