Budget 2022 Income Tax: One-time window for ITR correction allowed but here is what taxpayers have to pay

Budget 2022 Income Tax: Finance Minister Nirmala Sitharaman on Tuesday gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes.

Budget 2022: ITR correction - 25-50 per cent additional on due tax

- An additional 25 per cent on the due tax and interest would have to paid if the updated ITR is filed within 12 months

- While the rate will go up to 50 per cent if it is filed after 12 months, but before 24 months from end of relevant Assessment Year.

What's current scenario for ITR correction?

Currently, if the I-T Department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer.

Budget 2022: ITR correction

- "To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an updated return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year," Sitharaman said in her 2022-23 Budget speech.

- This is an "affirmative step in the direction of voluntary tax compliance", she added.

-"It is proposed that an amount equal to 25 per cent or 50 per cent as additional tax on the tax and interest due on the additional income furnished would be required to be paid," said the Budget memorandum.

- The minister said that the I-T Department has established a robust framework of reporting of taxpayers' transactions and some taxpayers may realise that they have committed omissions or mistakes in correctly estimating their income for tax payment.

-"Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return," she said.

Budget memorandum: New ITR provision

- As per the Budget memorandum, a new provision in section 139 of the I-T Act is being introduced for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year, or not.

-"The proposal for updated return over a period longer than that is provided in the existing provisions of Income Tax Act would on the one hand bring use of huge data with the IT Department to a logical conclusion resulting in additional revenue realization and on the other hand, it will facilitate ease of compliance to the taxpayer in a litigation free environment," the memorandum said.