Amendments to the Income Tax Act, 2025 has been proposed under the Union Budget 2026, allowing the taxpayers to submit the updated ITRs even after the issuance of reassessment notices.
At present, taxpayers u/s 263(6) of the Act to submit an updated return within 48 months from the end of the fiscal year succeeding the pertinent tax year. But, submitting an updated return was not allowed if the proceedings for assessment, reassessment, or any legal measures were due or completed for the cited tax year.
Taxpayers under the proposed amendment will be able to furnish an updated return in response to a notice u/s 280. As per the specified period in the notice, the updated return needs to be filed, and the taxpayer shall be prevented from submitting the returns in any other manner for that tax year.
The additional income tax subject to being paid for filing an updated return under the same provision shall see an amendment. At present, the taxpayers file 25%, 50%, 60%, and 70% of the aggregate tax and interest for filing updated returns in the first to fourth years, respectively.
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The proposed revision adds an additional 10% charge for returns submitted as per the section 280 notice. The income on which the same additional tax is filed shall not draw penalties u/s 439.
From April 1, 2026, the revision shall be effective, which is applicable for the tax year 2026-27 and subsequent years. Similar revisions are proposed for the Income Tax Act, 1961, effective from March 1, 2026, aligning procedures for updated returns under notices issued in reassessment cases.
As per the experts, the same revision is anticipated to ease compliance, reduce litigation, and deliver clarity to the taxpayers who desire to voluntarily rectify their income declarations even after reassessment proceedings have started.
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The government, with such revisions, outlines taxpayer-friendly reforms while assuring the integrity of the tax system, streamlining for taxpayers to correct past omissions without encountering excessive penalties.
