Thursday, December 22, 2022

Need for more expansive provisions for updated ITR

'Need wider provisions for updated ITR'


 MUMBAI: A number of taxpayers have encountered difficulties as a result of restrictive provisions regarding the filing of updated returns that were included in the most recent budget.


A citizen can record a refreshed return in the span of two years from the finish of the significant evaluation year, rather than a late return (documented past due date) or overhauled return (for making redresses) that can be documented three months before the finish of the important appraisal year or fulfillment of appraisal, whichever is prior. Although the deadline is extended, not all taxpayers are able to submit updated returns. As a result, taxpayers are hoping that the upcoming budget will include appropriate changes.


If an updated return is a loss-return or has the effect of decreasing the total tax liability or increasing the taxpayer's refund, it cannot be filed under the first proviso, section 139 (8A). In its pre-Budget memorandum, the Chamber of Tax Consultants (CTC) makes it clear that this is only beneficial to the revenue authorities.


Ironically, even reducing a loss claimed on an earlier I-T return is impossible for taxpayers. Let's say that the taxpayer, perhaps a startup company, wants to file an updated return stating a loss of, say, Rs 8 crore instead of the original Rs 10 crore. According to Ketan Vajani, a chartered accountant and former president of the CTC, "Filing an updated return is not permissible in such a situation also, due to the language of the first proviso, as it continues to be a loss-return."


Vajani also says that updated returns should be allowed to be filed when a taxpayer really missed making a claim for a deduction that is eligible in the past. A small filing fee could be charged to prevent complacency and cover the cost of processing such a return.


The Bombay Chartered Accountants Society (BCAS) recommends filing the updated return sooner rather than later. Ameet Patel, a chartered accountant and former BCAS president, stated that filing should be possible for all years for which reopening an assessment is permitted.


Upon payment of significant additional tax equal to 25% or 50% of the differential tax (depending on the filing delay of one year or more from the end of the relevant assessment year), an updated return can be filed. This must be reduced to encourage voluntary compliance. According to Patel, "progressively incremental tax rates may be provided based on the years of delay," such as 5% for an updated return filed within one year, 10% for a return filed within two years, and so on.

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