This move will give an opportunity to the Income Tax assessees to correct the errors or omissions in estimating their income for taxation purposes
Union finance minister Nirmala Sitharaman, on Tuesday, while presenting the Budget 2022, introduced the ‘Updated Return’ framework that will now allow the taxpayers to file updated returns within two years from the end of the relevant assessment year.
This will give an opportunity to the Income Tax assessees to correct the errors or omissions in estimating their income for taxation purposes.
“India is growing at an accelerated pace and people are undertaking multiple financial transactions. At times, some taxpayers may realise that they have committed omissions or mistakes in correctly estimating their income for tax payment and this new proposal of the government will give them an opportunity to take corrective measures within two years without any legal hassle,” Sitharaman said in her Budget speech.
She proposed a new provision to file an updated return after payment of additional tax. The updated return can be filed within two years from the end of the relevant assessment year.
The finance minister said that this new move will repose trust in the taxpayers which will enable the assessee to declare the unreported income while filing Income Tax Return (ITR) earlier.
“Presently, if the department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return,” said Sitharaman. She called it an affirmative step in the direction of voluntary tax compliance.
The updated return framework will now allow individual taxpayers more time to file their updated income tax returns in those cases where he/she missed declaring an income at the time of filing the ITR.
There was no change in the income tax slabs in the Budget though it was something that the middle class was looking forward to.
However, the finance minister proposed some changes in the tax deduction limit. Sitharaman said the tax deduction limit for employees of both state governments and the Centre should be increased to 14 per cent from the current 10 per cent. This is being done to bring the state government employees into the same bracket as those in the central government.