Budget 2025: Filing Updated Tax Returns Now Allowed for 4 Years: Key Points to Know

The government has extended the time limit for filing updated tax returns from 2 years to 4 years, allowing taxpayers more flexibility to correct errors in their filings.

What is an Updated Tax Return?

The updated return facility, introduced in 2022, lets taxpayers voluntarily correct mistakes or omissions in their original or belated tax returns. This initiative is based on trust in taxpayers, and so far, nearly 9 million people have used it to report accurate incomes.

New Changes in Budget 2025

Finance Minister Nirmala Sitharaman, in her Budget 2025 speech, announced an extension of the deadline for filing updated returns from 2 years to 4 years. The Finance Bill 2025 amends Section 139(8A) of the Income Tax Act, 1961, increasing the time window for updating returns to 48 months from the relevant assessment year.

Higher Additional Tax for Late Filings

Though taxpayers now get extra time, filing an updated return after 24 months comes with higher additional tax rates:

• 60% additional tax for returns filed between 24-36 months.
• 70% additional tax for returns filed between 36-48 months.

If a taxpayer receives a Section 148A show-cause notice after 36 months, they may be barred from filing a belated return unless the tax authorities allow it.

When Can You File an Updated Return?

Taxpayers can submit an updated return in cases such as:

• Missing the due date for filing a return.
• Incorrect declaration of income.
• Selecting the wrong head of income.
• Paying tax at the wrong rate.
• Reducing carried-forward losses.
• Reducing unabsorbed depreciation.
• Adjusting tax credit under Sections 115JB/115JC.

Why You Should File Early

Experts advise taxpayers not to wait for the full 4-year period to update their returns. The longer you delay, the higher the penalty in the form of additional tax and interest. Filing early will help reduce extra costs and avoid compliance risks.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.