ITR-U changes:Fix tax return errors of up to 4 years but with extra charges

To encourage voluntary compliance, the Central Board of Direct Taxes (CBDT) has notified an updated mechanism for filing income tax returns through ITR-U. Taxpayers now have up to 48 months from the end of the relevant assessment year to correct errors or omissions in previously filed returns, double the earlier 24-month period. However, this extended window comes at a cost.
ITR-U is applicable to any individual or corporate entity that has omitted or misreported income, missed deductions, or failed to file returns altogether.
What's new in the updated ITR-U?
According to Ritika Nayyar, partner at Singhania & Co., the amended framework mandates filing the complete applicable ITR form along with ITR-U, as opposed to the earlier simplified standalone format.
'This includes comprehensive financial details beyond just the additional income,' Nayyar said.
The additional tax is now levied progressively based on the delay:
25 per cent of tax and interest if filed within 12 months
50 per cent for 12–24 months
60 per cent for 24–36 months
70 per cent for 36–48 months
Sandeep Bhalla, partner at Dhruva Advisors, added that taxpayers must also disclose the source of additional income, provide specific reasons for updating the return, and complete a more detailed verification process. Importantly, the form cannot be used to claim refunds or reduce existing tax liabilities.
'The aim is to regularise tax liabilities before detection by authorities. Penalties under ITR-U are significantly lower than those for tax evasion,' Nayyar noted.
Bhalla highlighted that this facility offers a final chance to rectify inconsistencies, such as unreported interest, rental income, or capital gains, particularly if discrepancies appear in the Annual Information Statement (AIS) or Taxpayer Information Summary (TIS).
Opportunity and limitations
While the 48-month window offers flexibility, both experts cautioned against misuse.
'ITR-U cannot be filed if search or survey actions have been initiated, or in cases involving serious proceedings under laws like the PMLA or Benami Act,' Nayyar said.
Taxpayers are urged to match all disclosures with Form 26AS, AIS, and TIS.
'Accuracy is critical. Errors can invite scrutiny despite the voluntary nature of this facility,' Bhalla warned.
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