Many taxpayers are receiving communication from tax department to check the deductions claimed on account of donations made to political parties and to rectify their tax returns if such donations are incorrect.
As per the current tax laws, such rectification of return (referred to as “Updated Return”) can be carried out only for 2 years from the end of the assessment year. for eg: The Updated Return for Financial Year (FY) 2021-22 can be filed till 31st March 2025 but the Updated Return for FY 2020-21 cannot be filed since its due date of 31st March 2024 has lapsed.
However, there is a possibility that such taxpayers might have claimed similar incorrect deductions in the earlier years also but are not in a position to update their return and pay tax even if they want to do it voluntarily because the due date for the same has lapsed.
In Budget 2025, this time limit of 2 years has been revised to 4 years from the end of the assessment year and now the taxpayers have 2 additional years to update their incorrect tax returns.
Financial Year ending | Updated Return Due Date | |
Prior to Budget 2025 | Post Budget 2025 | |
March 2020 | 31st Mar 2023 | 31st Mar 2025 |
March 2021 | 31st Mar 2024 | 31st Mar 2026 |
March 2022 | 31st Mar 2025 | 31st Mar 2027 |
March 2023 | 31st Mar 2026 | 31st Mar 2028 |
March 2024 | 31st Mar 2027 | 31st Mar 2029 |
As can be seen from the above table, the taxpayers can now update their tax return filed for FY ending March 2021 till 31st March 2026. Of course, the taxpayers are liable to pay additional tax for such updated return as per the following:
Time of filing Updated Return (Calculated from end of the FY for which the return belongs) | Additional Tax Rate (as % of tax + interest payable) |
Up to 2 years | 25% |
2 – 3 years | 50% |
3 – 4 years | 60% |
4 – 5 years | 70% |
Have you filed erroneous tax returns for earlier years? This is an opportunity for you to file an Updated Return voluntarily and avoid income tax assessment in which a penalty from 100% to 300% of the tax amount can be levied.
By: Vishal Shah, SEBI Registered Investment Advisor and founder of Bachhat
Feb 3, 2025
Disclaimer: This is not a financial advice and the readers should reach out to registered investment advisors for any financial advice. Registration granted by SEBI, membership of BASL and certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.)
For a comprehensive guide on this topic, read our blog: Budget from the lens of financial planning. It provides detailed information and expert insights you won’t want to miss!