Taxpayers who discover that income was omitted from an earlier Income Tax Return may have an opportunity to correct the position through an Updated Return (ITR-U). The updated-return framework now permits eligible taxpayers to file an updated return for a significantly longer period—up to 48 months, subject to the applicable conditions and payment of additional tax. The Income Tax Department has also made utilities available for filing updated returns for earlier assessment years under the revised framework.

Can ITR-U Be Used to Correct Any Mistake?

No. An Updated Return is primarily a mechanism for voluntarily correcting omissions that result in additional income or additional tax liability. It cannot generally be used to reduce the tax liability already reported, increase a refund, or report a higher loss. The new Income Tax Act, 2025 also provides for updated returns, with the Department confirming a 48-month framework and additional income-tax payable depending on when the return is filed.

How Does It Matter to Businesses and Taxpayers?

Businesses should consider reviewing older returns where subsequent reconciliation has identified unreported income, incorrect classification of taxable receipts, omitted transactions or other discrepancies. With information increasingly available to the Income Tax Department through AIS, TDS/TCS reporting and other information-reporting mechanisms, discrepancies relating to earlier years may become visible even after the original return has been filed.

However, filing an ITR-U should not be treated as a routine correction exercise. Before filing, taxpayers should evaluate why the original return was incorrect, whether ITR-U is legally available for that year, the additional tax cost involved, and whether any assessment or other proceeding affects eligibility.

A timely voluntary review of older tax positions can therefore be valuable where a genuine omission is subsequently identified.

Mardia Global | Tax & Accounting Insights for Businesses in India