CBDT notifies tax return form (Form ITR-U) and the manner to furnish updated return

 This Tax Alert summarizes the key highlights of Notification No.48/2022 dated 30 April 2022 issued by the Central Board of Direct Taxes (CBDT) which amends the Income Tax Rules, 1962 by inserting Rule 12AC which provides for tax return form (Form ITR-U) and the manner for furnishing updated return.

The Notification is issued pursuant to the introduction of the new scheme under the Income Tax Laws (ITL) by Finance Act (FA) 2022, which permits all taxpayers to file an “updated return” within 36 months from the end of the relevant tax year, subject to various conditions. While furnishing the updated return, the taxpayer is also required to pay an additional tax of 25% or 50% on tax and interest due on such updated return while providing for immunity from penalty and prosecution. The scheme is introduced with the object of providing an opportunity for voluntary compliance by taxpayers in order to rectify errors in the last valid return filed and to reduce litigation.

The CBDT, in deference to powers conferred under such new scheme, has notified the Rule containing the new tax return form and the manner to furnish such updated return

The updated return has to be furnished in Form ITR-U, along with an updated version of the applicable tax return form (Form ITR 1 – 7). In addition to routine details of name, permanent account number (PAN), tax years, additional income reported etc., Form ITR-U requires taxpayer to select reason for submitting updated return from out of the eight options provided, including (1) return previously not filed or (2) income not reported correctly or (3) wrong head of income chosen or (4) wrong rate of tax or (5) reduction of carried forward losses, unabsorbed depreciation (UAD) or Minimum Alternate Tax (MAT) credit/Alternate Minimum Tax (AMT) credit. If taxpayer is furnishing updated return to reduce carried forward losses, UAD or MAT credit/AMT credit, then Form ITR-U requires taxpayer to specify also the tax years wherein such carried forward loss, UAD or MAT credit/AMT credit, are affected because of such updated return, with an information whether any revised return or updated return has been filed for such affected tax year/s.

Form ITR-U also provides for an involved method for working of tax liability on additional income and additional tax liability @ 25%/50%, as the case may