According to tax law experts, a taxpayer who has not filed income tax returns for the past three years can only file an ITR for one assessment year at a time in the regular course. However, the law provides relief through Updated ITR filing for taxpayers who have missed filing earlier returns or need to revise filed returns to include taxable income. As reported by Moneycontrol, a person can file an updated ITR for a maximum of four years preceding the current assessment year, covering assessment years 2022-2023, 2023-2024, 2024-2025, and 2025-2026. The Updated Income Tax Return (ITR-U), governed under Section 139(8A) of the Income Tax Act, serves as a specialized form introduced to help taxpayers correct errors, fix omissions, or declare unrecorded income from previous financial periods.
When filing Updated ITRs, taxpayers must pay additional tax beyond regular tax and interest, with the quantum depending on the quantum of delay in filing the ITR. According to the expert advice, filing Updated ITRs for all earlier years is recommended to ensure complete compliance and avoid potential future complications. The wider reporting requirements of the Income Tax Department mean they have extensive data about taxpayers, and omissions may eventually be detected, leading to increased additional tax liability if filed pursuant to a notice. Important penalty updates under Budget 2026 now allow taxpayers to file an updated return even after re-assessment proceedings have commenced, but this comes at an extra 10% additional tax penalty.
Tax experts recommend filing Updated ITRs for all earlier years rather than limiting to the current year alone, even when receiving a notice for Assessment Year 2025-26. As reported by Moneycontrol, this approach ensures complete compliance and provides peace of mind for taxpayers who have missed filing returns for several years. The strategy addresses the Income Tax Department's extensive data capabilities and helps avoid potential future complications from incomplete filing history. Filing a voluntary update is significantly cheaper than waiting for a formal notice from the department, with the exact penalty amount escalating based on filing delays.
