Updated Return (ITR-U): Eligibility, Time Limit and Additional Tax

Introduction

A taxpayer may sometimes discover an omitted income, incorrectly reported transaction or other error after the time limit for filing a belated or revised income-tax return has expired. The Updated Return facility, commonly called ITR-U, allows eligible taxpayers to voluntarily correct such omissions within an extended period by paying the resulting tax, interest, applicable fee and additional income-tax.

The Finance Act, 2025 extended the ITR-U filing window from 24 months to 48 months. Consequently, the additional-tax structure now has four slabs: 25%, 50%, 60% and 70%. The Finance Act, 2026 further widened the scope by permitting an updated return in specified loss-reduction cases and in response to a reassessment notice, subject to additional conditions.

What is an Updated Return?

An Updated Return is a return furnished after the regular period for filing an original, belated or revised return has ended. It may be filed whether or not the taxpayer had previously furnished an original, belated or revised return for that assessment year.

ITR-U is intended primarily for voluntary disclosure of additional taxable income or correction of errors that increase the taxpayer’s tax liability. It cannot ordinarily be used to reduce the tax payable or to claim or increase a refund. 

Legal provisions governing ITR-U

For assessment years relating to periods before the Income-tax Act, 2025 became applicable, the principal provisions continue to be sections 139(8A) and 140B of the Income-tax Act, 1961, read with Rule 12AC of the Income-tax Rules, 1962.

For Tax Year 2026–27 and subsequent years, the corresponding provisions are contained in sections 263(6) and 267 of the Income-tax Act, 2025. The Income-tax Act, 2025 came into force on 1 April 2026.

The official transition guidance specifically states that returns relating to FY 2025–26, including subsequent updated returns for AY 2026–27, remain governed by the Income-tax Act, 1961. Similarly, ITR-U filings for AY 2025–26 and earlier continue under section 139(8A) of the old Act using the forms applicable to those years. 

Who is eligible to file an ITR-U?

Subject to the restrictions discussed below, an Updated Return can be filed by any eligible person, including an:

• individual;
• Hindu Undivided Family;
• firm or Limited Liability Partnership;
• company;
• Association of Persons or Body of Individuals;
• trust or institution; or
• person filing in a representative capacity.

A taxpayer may file an ITR-U even if no return was filed earlier. It may also be filed after an original, belated or revised return, provided an updated return has not already been filed for the same assessment year. 

Updated return for reducing a loss

The Finance Act, 2026 permits an updated return where:

1. the taxpayer sustained a loss for the relevant year;
2. the original return of loss was filed within the applicable due date; and
3. the updated return either converts the loss into positive income or reduces the amount of loss previously claimed.

For example, if a taxpayer filed a timely return declaring a business loss of ₹10 lakh but later discovers omitted business income of ₹6 lakh, an updated return may be filed reducing the reported loss to ₹4 lakh. The 2026 form notified under Rule 12AC expressly provides “loss not reported correctly” and “reduction of loss” as reasons for filing ITR-U.

Where the updated return reduces a carried-forward loss, unabsorbed depreciation, MAT credit or AMT credit affecting later years, the taxpayer may also be required to furnish updated returns for the affected subsequent years.

When can an ITR-U not be filed?

An Updated Return cannot ordinarily be filed in the following circumstances.

1. It lowers the tax liability

ITR-U cannot be used where the updated computation reduces the total tax liability determined on the basis of the earlier return.

2. It creates or increases a refund

An updated return cannot be used to:

• claim a refund where no refund was due earlier; or
• increase the amount of refund determined under the earlier return.

Therefore, ITR-U is not a substitute for a revised return or a condonation request intended solely to claim a missed refund. 

3. An ITR-U has already been filed

Only one Updated Return can be furnished for a particular assessment year. An ITR-U cannot itself be revised. Taxpayers should therefore ensure that all omitted income and consequential changes are correctly incorporated before submission. 

4. Assessment or related proceedings are pending or completed

A taxpayer is generally ineligible where assessment, reassessment, or proceedings for the relevant year are pending or have already been completed.

An exception now exists where the ITR-U is furnished in response to a reassessment notice under section 148 of the 1961 Act—or section 280 under the 2025 Act—within the period specified in that notice. 

Time limit for filing ITR-U

The maximum time limit is 48 months from the end of the relevant assessment year under the Income-tax Act, 1961.

Under the Income-tax Act, 2025, the equivalent wording is 48 months from the end of the financial year succeeding the relevant tax year. In practical terms, both provisions establish a four-year updated-return window. 

Assessment years open during FY 2026–27

As of 5 July 2026, the Income Tax Department lists the following assessment years as available for ITR-U filing:

The applicable percentage depends on the actual date of filing. A delay crossing into the next 12-month band can substantially increase the amount payable. Portal availability and any assessment-related restriction must also be checked before filing. 

AY 2026–27 is not presently included in this ITR-U list because the ordinary filing, belated-return and revised-return framework for that year is still relevant. The e-filing portal currently identifies AY 2022–23 to AY 2025–26 as the ITR-U years available in FY 2026–27. 

Additional tax payable with ITR-U

The additional income-tax is calculated as a percentage of the aggregate of tax and interest payable on the updated return. It is not calculated as a percentage of the omitted income.

For this purpose, “tax” includes applicable surcharge and health and education cess. Where interest was paid with an earlier return, the adjustment prescribed under section 140B or section 267 must be made while determining the relevant aggregate. 

Additional 10% for ITR-U filed after a reassessment notice

Where an Updated Return is filed in response to a notice under section 148 within the period specified in that notice, an additional amount equal to 10% of the aggregate tax and interest is payable over and above the normal ITR-U percentage.

Accordingly, the effective additional-tax percentages in such cases become:

The additional income disclosed in an ITR-U filed pursuant to the notice does not form the basis for imposing penalty under section 270A. This is a limited statutory protection and should not be treated as general immunity from every penalty, prosecution or other consequence. 

What must be paid before filing?

Depending on the taxpayer’s facts, the total payment may include:

1. tax on the income reported in the updated return;
2. surcharge and health and education cess;
3. interest under sections 234A, 234B and 234C, wherever applicable;
4. late-filing fee under section 234F, where applicable;
5. additional income-tax at 25%, 50%, 60% or 70%;
6. the further 10% amount where the ITR-U is filed in response to a reassessment notice; and
7. adjustment of any refund already issued for the relevant assessment year.

Tax, interest, fee and additional tax must be paid before filing. The payment details must be correctly reported in the return; otherwise, the return may be treated as defective. 

Common mistakes while filing ITR-U

Treating the additional tax as a percentage of omitted income

The percentage applies to the aggregate tax and interest payable, not directly to the additional income.

Filing ITR-U to claim a refund

ITR-U cannot ordinarily be used where the result is a new refund or an increase in an earlier refund.

Ignoring a refund already received

Where a refund was issued on the earlier return, it may have to be added back while determining the payment required under the updated return.

Waiting until the next additional-tax band

Crossing the 12-, 24- or 36-month threshold increases the additional tax from 25% to 50%, 60% or 70%.

Reporting only one omitted item

Since only one ITR-U can be filed for an assessment year and it cannot be revised, all income heads, deductions, losses, credits and taxes should be reviewed before filing.

Ignoring the effect on later years

Reduction of carried-forward loss, depreciation, MAT credit or AMT credit may require consequential updated returns for subsequent assessment years.

Assuming ITR-U provides complete immunity

ITR-U supports voluntary compliance, but it does not automatically protect the taxpayer from every assessment, penalty, interest or prosecution consequence. Eligibility and the legal effect must be considered separately.

Income-tax Act, 2025: transition position

The Income-tax Act, 2025 is in force from 1 April 2026, but this does not mean that every return filed after that date is governed by the new Act.

The applicable legislation depends on the period to which the income and return relate:

• AY 2026–27 and earlier: Income-tax Act, 1961 continues to govern original, revised, belated and updated returns.
• Tax Year 2026–27 onwards: Income-tax Act, 2025 applies, subject to its commencement, saving and transitional provisions.
• Earlier-year ITR-U filed after 1 April 2026: Old Act forms and section 139(8A) continue to apply.
• Future ITR-U under the new Act: Sections 263(6) and 267, read with Rule 165 and Form ITR-UN, apply.

The change to the 2025 Act is largely structural and linguistic for the core ITR-U framework, although the Finance Act, 2026 made substantive refinements concerning loss reduction and updated returns filed after reassessment notices. 

Conclusion

The Updated Return facility provides taxpayers with an extended opportunity to disclose missed income and correct tax under-reporting after the normal return-filing period has expired. However, the cost increases substantially with time, and the facility is subject to strict eligibility restrictions.

Before filing, the taxpayer should verify the applicable assessment year, legal eligibility, omitted income, tax credits, prior refunds, interest, loss adjustments and additional-tax slab. Since an ITR-U cannot be revised, the complete tax position should be reconciled before submission.