Budget 2022 has introduced several amendments to tax laws. The Budget showcased an increased focus on virtual digital assets such as cryptocurrency and electric vehicles and emphasised domestic manufacturing in various sectors. One of the most important amendments was an update regarding income tax returns. A provision was introduced that allowed for the submission of an updated return within 24 months from the end of the assessment year if a person had not already submitted an original, belated, or revised ITR. While submitting your returns, it is also important to ensure that you choose the right form out of the seven types of ITR.
While most have commended the Finance Ministry for proposing the late submission of returns, some are skeptical about its application. Let’s take a look at both sides of the coin.
What does the provision state?
Section 139 of the Income Tax Act deals with the various rules and provisions when it comes to filing Income Tax Returns. As per prevalent laws, 31st July of the assessment year is usually the last date when a taxpayer can file an Income Tax Return. This date can be, and often is, extended by the government. To get a good estimate of the amount of income tax you owe, and thus, ensure a smoother ITR experience, you can use an income tax calculator.
Where do the new provisions apply?
According to the amendment, if you need to submit a revised ITR because you have to pay additional tax, then you can do so within a duration of two years. Taxpayers can thus declare any tax liabilities they may have initially missed out on.
This provision would not be applicable in cases of loss or decrease in the tax liability of the taxpayer. If you have filed for a return with your previous ITR, then the provision may not be applicable if the revised ITR leads to an increase in the refund.
So, if you have paid additional advance tax or are claiming a higher amount of refund, then the newly proposed amendments may not be beneficial for you.
Pros of the updated ITR provisions
Gives the taxpayer more time to submit their revised ITR
There are a variety of reasons a taxpayer may commit some mistakes in their ITR. One may forget a source of income, while others may choose the wrong ITR from the various types of ITR available to them. In their hurry to submit the ITR on time, one may overlook these mistakes. Now, the scope for these mistakes to affect the taxpayer is likely to be low since there is the opportunity to rectify them.
Less litigation for the taxpayer
Even though you may use tools such as an income tax calculator, you may make some mistakes getting your tax liability amount right. Earlier, if a mistakenly forgotten source of income were to be found by the IT department, it would lead to a long process of heavy interest, litigation, charges, and so on. The taxpayer would have to dedicate their time and funds to resolve these issues. The new provision to submit the revised returns will substantially reduce the burden on the taxpayer in the event of such mistakes.
This also puts trust in taxpayers and motivates them to reach out to the IT department in case they have committed an honest mistake.
Cons of the updated ITR provisions
The provision can only be availed in case of additional tax
One defect of this provision is that only those who have to pay additional tax can avail of this scheme. Those who are seeking additional refunds or want their tax liability reduced cannot really benefit from this scheme. Thus, some are of the opinion that, ultimately, this scheme only aims to benefit the IT department and not the average taxpayer.
Additional tax to be paid to avail of this scheme
To avail of the new provisions, one has to pay a certain amount of additional tax. This can lead to the taxpayer losing out on more money than they would if they had not filed the revised returns.
If your tax liability is over Rs 10,000, then you may have to pay advance tax in instalments. Tax benefits are subject to amendments in tax laws. Do consult a tax expert before going ahead with any financial decisions.
