ITR Old Tax Filing: Here is your chance to file two years old tax, know what are the rules

For founders and business owners in India, staying compliant with tax regulations is paramount. Missing the income tax return (ITR) filing deadline can be a significant concern, but the Income Tax Department offers avenues to rectify such oversights. You might have an opportunity to file your tax returns for up to two years past the original due date, a provision that can be a lifesaver for those who missed their filing window. This article delves into the rules, eligibility, and processes involved in filing old tax returns, including the nuances of the updated return (ITR-U).

Understanding the Need to File Previous Year’s ITR

There are several reasons why a business owner or founder might need to file an ITR for previous years. Common scenarios include:

• Oversight or Missed Deadlines: Simple human error or being overwhelmed with business operations can lead to missing the original ITR due date.
• Unreported Income: Discovering previously unrecorded income or realizing that certain income sources were not declared in the original return.
• Claiming Missed Deductions or Credits: Identifying eligible deductions or tax credits that were not claimed in the initial filing.
• Rectifying Errors: Correcting mistakes made in the original ITR, such as incorrect information or wrong tax calculations.
• Compliance Requirements: Some entities might require proof of tax filing for previous years for business expansion, loan applications, or other financial transactions.

Filing Belated Income Tax Returns: The Traditional Route

Before the introduction of the updated return, the primary method for filing an ITR after the due date was through a belated return.

What is a Belated Return?

A belated return is an Income Tax Return filed after the expiry of the original due date but before the completion of the Assessment Year. The Income Tax Act, 1961, allows for this provision under Section 139(4).

Eligibility for Filing a Belated Return:

Any taxpayer who has missed the original due date can file a belated return, provided they do so within the stipulated time frame.

Time Limit for Filing a Belated Return:

You can file a belated return up to three months prior to the end of the relevant Assessment Year. For instance, for the Assessment Year 2023-24 (which corresponds to the Financial Year 2022-23), the last date to file a belated return was March 31, 2024. For AY 2022-23 (FY 2021-22), the last date to file a belated return was March 31, 2023.

Consequences of Filing a Belated Return:

While filing a belated return allows you to comply with tax laws, there are consequences:

• Late Filing Fee/Penalty: For Assessment Year 2023-24 (FY 2022-23) onwards, a penalty is levied.
  • If total income does not exceed ₹5 lakh, the penalty is ₹1,000.
  • If total income exceeds ₹5 lakh, the penalty is ₹5,000. This penalty is levied in addition to the tax due.
• Interest on Tax Due: If there is any tax payable, interest under Section 234A will be charged at 1% per month or part of a month from the due date until the date of filing.
• Loss of Carry-Forward Benefits: Certain losses, such as business losses or capital losses, cannot be carried forward to future years if the ITR is filed belatedly. However, losses from house property can still be carried forward.

Exceptions for Filing a Belated Return:

While the general rules apply, understanding specific scenarios is crucial. For instance, losses from house property can be carried forward even if the return is filed belatedly, unlike other types of losses which generally require timely filing to be carried forward.

The Introduction of the Updated Income Tax Return (ITR-U)

The Income Tax Department introduced the Updated Return (ITR-U) under Section 139(8A) of the Income Tax Act, providing a more flexible window for taxpayers to correct or update their previously filed returns. This is particularly relevant for those who have missed filing their original return entirely or need to declare additional income.

Why File Under Section 139(8A)?

Section 139(8A) was introduced to provide taxpayers with an opportunity to correct any mistakes or omissions in their filed returns. It acts as a safety net for genuine errors or overlooked income.

What Can You Show in Your ITR-U?

An ITR-U allows you to:

• Report any income that was omitted.
• Correct any mistakes in your previously filed return.
• Claim any deductions or reliefs that were not claimed earlier.
• Report any tax credit that was not claimed.

Essentially, it’s a mechanism to ensure your tax return accurately reflects your true income and tax liability.

Eligibility for Filing an ITR-U:

• You must have already filed an original or a belated return for the relevant Assessment Year.
• You cannot file an ITR-U if you have filed a revised return or an updated return for the same Assessment Year previously.
• You cannot file an ITR-U if a search or survey has been initiated against you, or if any prosecution proceedings have been initiated.
• You cannot file an ITR-U if the Assessing Officer has passed an order under Section 143(3) or Section 153A/153C.

Time Limit for Filing an ITR-U:

The crucial aspect of ITR-U is its extended window. You can file an updated return within 24 months from the end of the relevant Assessment Year.

• For AY 2023-24 (FY 2022-23), the last date to file an ITR-U is March 31, 2026.
• For AY 2022-23 (FY 2021-22), the last date to file an ITR-U was March 31, 2025.

This means you can potentially file for two previous Assessment Years using the ITR-U facility if the deadlines are met.

Consequences of Filing an ITR-U:

Filing an ITR-U comes with specific conditions and consequences:

• Payment of Additional Tax: You must pay the additional tax due on the income disclosed in the updated return, along with applicable interest.
• Additional Fee: In addition to the tax and interest, an additional fee is levied. The amount of this fee depends on when you file the updated return:
  • If filed within 12 months of the end of the Assessment Year: The fee is 25% of the aggregate of tax and interest payable.
  • If filed between 12 months and 24 months of the end of the Assessment Year: The fee is 50% of the aggregate of tax and interest payable.
• No Refund: You cannot claim a refund through an ITR-U. If you have overpaid tax, you will need to file a revised return or claim it through other means.
• No Carry-Forward of Losses: Similar to belated returns, filing an ITR-U may impact your ability to carry forward certain losses.

How to File an Updated Return (ITR-U)

The process for filing an ITR-U is conducted online through the Income Tax Department’s e-filing portal.

1. Login to the Portal: Access the Income Tax e-filing portal (incometax.gov.in) using your credentials.
2. Navigate to ITR-U: Go to the ‘e-File’ section and select ‘Income Tax Return’ followed by ‘File Updated Return’.
3. Select Assessment Year and Original Return Filing Status: Choose the relevant Assessment Year for which you are filing the updated return. Indicate whether you have filed an original return or not.
4. Choose Reason for Update: Select the appropriate reason for filing the updated return from the given options (e.g., omission of income, wrong particulars, etc.).
5. Enter Details: Fill in the required details in the ITR-U form, including income, deductions, and tax paid. Ensure all information is accurate.
6. Compute Tax Liability: The portal will calculate the total tax, interest, and additional fee payable based on the information provided.
7. Pay Tax and Fees: Make the payment for the computed tax, interest, and additional fee.
8. Submit ITR-U: After successful payment, submit the updated return. You will receive an acknowledgment.

Can You File ITR for the Last 3 Years?

You can file ITR for the last three Assessment Years, but the method depends on the time elapsed and the specific deadlines.

• For the last two Assessment Years: You can utilize the Updated Return (ITR-U) facility under Section 139(8A), provided you meet the eligibility criteria and pay the applicable additional fee. As of early 2026, this would include AY 2023-24 and AY 2022-23.
• For the third Assessment Year prior: Filing a belated return under Section 139(4) might be an option, but only if the deadline for filing such a return has not yet passed. The deadline for filing a belated return is three months prior to the end of the Assessment Year. For example, the deadline to file a belated return for AY 2021-22 (FY 2020-21) was March 31, 2023, which has already passed. Therefore, filing for AY 2021-22 as a belated return is no longer possible.

It’s crucial to check the specific deadlines for each Assessment Year to determine current filing possibilities.

What Happens If You Miss Filing ITR Entirely?

Missing the filing deadline for even a belated return can have serious repercussions. Beyond the penalties and interest mentioned earlier, consistent non-filing can lead to:

• Scrutiny and Assessment: The Income Tax Department may initiate assessment proceedings to determine your tax liability.
• Disallowance of Expenses: For businesses, non-filing can lead to the disallowance of certain business expenses.
• Difficulty in Obtaining Loans or Visas: Financial institutions and immigration authorities often require proof of income tax filing.
• Legal Action: In severe cases of tax evasion, legal action can be taken.

How to Avoid Penalties and Late Fees for Belated Returns

The best strategy is always timely compliance. However, if you find yourself needing to file late:

• File as Soon as Possible: The sooner you file, the less interest you will accrue.
• Accurate Information: Ensure all income and deductions are reported correctly to avoid further complications.
• Understand the Rules: Be aware of the penalties and interest applicable to your situation.
• Seek Professional Help: For complex situations or if you are unsure about the process, consulting with a tax professional can save you from errors and ensure compliance.

Navigating the complexities of tax filing, especially when dealing with previous years, can be daunting for any business owner. Understanding the provisions for belated returns and the updated return (ITR-U) is key to maintaining financial discipline and avoiding penalties. If you’re facing challenges with past tax filings or need expert guidance on your tax obligations, Verslas Guru offers comprehensive solutions to ensure your business remains compliant and financially sound.