Updated Return (ITR-U)

What it means

An updated return, filed in form ITR-U, lets you report income that you missed or under-reported in an earlier year, even after the normal time for filing or revising a return has passed. It can also be filed if you never filed a return for that year. The price of this second chance is extra tax on top of the normal tax and interest.

How it works

• Time limit: within 48 months from the end of the relevant assessment year, as extended by Budget 2025.

• Additional tax, as a percentage of the tax and interest on the extra income: 25% if filed within 12 months, 50% within 24 months, 60% within 36 months, and 70% within 48 months.

• All tax, interest, late fee and additional tax must be paid before filing.

• It cannot be used to claim or increase a refund, reduce tax, or create or increase a loss.

• It cannot be filed where a search or survey has been initiated for that year, or where an assessment or reassessment is completed or pending, with limited relaxations introduced by Budget 2026.

• Only one updated return can be filed for each year.

Example

Ajay forgot to report ₹2,00,000 of freelance income for FY 2023-24 (assessment year 2024-25). He is in the 20% slab under the old regime. He files ITR-U in October 2026, which is about 19 months after the end of the assessment year (31 March 2025), so the 50% rate applies.

1. Tax on extra income: ₹2,00,000 x 20% = ₹40,000.

2. Cess at 4%: ₹1,600, so tax is ₹41,600.

3. Interest under 234A and 234B, assume: ₹12,000.

4. Tax plus interest: ₹41,600 + ₹12,000 = ₹53,600.

5. Additional tax at 50%: ₹53,600 x 50% = ₹26,800.

6. Total payable before filing: ₹53,600 + ₹26,800 = ₹80,400.

Had he filed within 12 months of the end of the assessment year, the additional tax would have been only 25%, or ₹13,400.

Key points to remember

• File as early as possible. Each extra year raises the additional tax sharply.

• ITR-U is far cheaper than penalties for under-reporting income found later by the department, which can be 50% to 200% of the tax.

• Use the AIS to check for missed income such as interest, dividends or share sales before filing.

• If a revised return is still possible, use it instead. It costs much less.

• Keep the challan and computation for the additional tax, as the department may ask for proof.