Introduction

Did you miss filing your ITR last year or the year before? If the answer is yes, then now you must be piled under the constant stress of how to get out of this debacle. Thankfully, the IT department understands that life gets busy, and before you know it, the deadline comes and goes. So, to help many other taxpayers like you, the government still lets individuals file ITRs for previous years. The Income Tax Department gives taxpayers a second chance to stay compliant. This is where the concept of belated returns and ITR-U come in.

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Is it Possible to File ITR for the Previous Year?

Absolutely! You can file an ITR for a previous year as per Section 139(4) of the Income Tax Act, 1961, but there are certain rules and limitations. The window to file for a previous year is available under the ‘belated return’ option. However, this is only possible for one assessment year before the current one. So, if you missed filing for 2023-24 by July 31st, you can still do it in 2024, but you can’t go further back.

The deadline to file this return is the 31st of December of the current year. Although, belated returns might sound like a sigh of relief for many, it does come with certain exemptions from tax relaxations and a penalty late fee under section 234F. Also, what if you want to go further than last year?

In this case, ITR-U, or Updated Return, is the provision you’re looking for. This convenience was introduced in the Finance Act of the Union Budget in 2022 to allow late taxpayers file returns for the preceding two assessment years in addition to the current year. This means you can now file your ITR for three previous years. 

Things to Know Before Filing an ITR-U

Before you start filling out the ITR-U form to file ITR for previous years, it is important to keep certain aspects of your request under consideration.

• Filing window: The time limit to file an ITR-U form is 24 months from the end of the relevant assessment year. This means that if you’re filing for FY 2023-2024 (AY 2024-2025), the ITR-U filing deadline would be 31st March 2027.
• Added Taxes: Filing an ITR-U comes with additional taxes. If the ITR-U is filed within 12 months after the assessment year ends, taxpayers are required to pay an extra 25% of the tax (+ interest). If filed between 12 and 24 months, the additional amount is 50% (+ interest).

How to File ITR Requests for Previous Years?

The process to file ITR for previous years is similar to filing a regular return, but there’s a slight twist. Here’s how to get it done:

Step 1: Log in to the IT e-Filing portal

Head over to the Income Tax e-Filing Portal and log in with your credentials. If you don’t have an account, register using your PAN number.

Step 2: Choose the appropriate assessment year 

While filing the ITR-U request, make sure to select the correct assessment year for the financial year you missed. The assessment year is always one year ahead of the financial year you’re filing for.

Step 3: Select the ITR-U form

Head over to the ITR-U section from the forms option and click on the relevant year. Also, select the kind of ITR form you will be filing from the list of seven different forms for different income slabs/sources.

Step 4: Enter income and deduction details

Just like with a regular return, enter your income details from your Form 16 in case you are a salaried employee or other relevant forms. Don’t forget to claim your deductions under 80C, 80D, and so on. Also, match your details in Form 16 with Form 26AS. Now, you can calculate the tax amount.

Step 5: Pay for the financial penalties

Late filing comes with penalties. You’ll be charged under Section 234F after you are done calculating all additional taxes. You will be charged a lump sum final amount, including your penalties, late fees, and other interests, depending on the assessment year you’re filing for. Click on Submit.

Step 6: Verify

Now, after you receive an acknowledgment number and have submitted the return, don’t forget to verify it. Use either Aadhaar OTP, bank account validation, or simply send the signed copy of ITR-V to CPC Bengaluru to finish the process.

Restrictions on Filing an ITR-U?

While ITR-U simplifies the process of filing an updated ITR, there are certain restrictions that taxpayers may face. Under section 139(8A), ITR-U cannot be used by taxpayers who:

• Have already been audited or assessed for the year
• Are filing a nil return, or are trying to reduce their tax liability
• Were subject to search or seizure proceedings during the relevant assessment period
• Are prosecuted under the Income Tax Act 

What Happens if ITR isn’t Filed for Two Years?

Missing out on filing an ITR for one year is already stressful, but missing two or more years can bring a range of consequences. Here’s what could happen:

• Hefty penalties

As mentioned, you’ll be hit with late fees under Section 234F. The longer you delay, the more you pay. The penalty stacks up to ₹10,000 or more, depending on your income bracket.

• Interest on unpaid taxes

If you had a tax liability in those years and didn’t pay, you will be charged interest on the unpaid taxes under Section 234A, 234B, and 234C. This adds a significant amount to your total dues.

• Loss of refunds

If you had a refund due for the missed years, you won’t be able to claim it after a certain time. This means you could lose out on money that rightfully belongs to you.

It is important to note that filing an ITR-U does not allow taxpayers to claim or increase refunds. An ITR-U can only be used to rectify or disclose under-reported income; however, it cannot reduce tax liabilities or increase refunds for the past years.

• Increased scrutiny by the IT department

The Income Tax Department may flag your account for scrutiny if you miss multiple years of filing. They could send notices, ask for explanations, or even impose penalties beyond late fees.

• Prosecution and legal trouble

In extreme cases, especially where large sums of tax are involved, failure to file for multiple years can lead to legal actions or even prosecution under Section 276CC. However, this is rare and typically applies to those with large incomes who consistently avoid filing.

Conclusion

Filing your Income Tax Return (ITR) for past years is crucial. When you file your ITR for previous years, it’s like taking care of your financial duties as it helps you get any money back in case you have overpaid, fix any mistakes you made and keep a good record of following tax rules. By being vigilant, you can enjoy the benefits and avoid any problems that come your way.  

Wondering how to navigate the confusing terrains of filing an ITR? Get in Touch with experts at 1Finance for help!