Important things to keep in mind while calculating tax in updated return [Section 140B]

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Updated return provisions are covered under section 139(8A) of the Income tax act.

As we all know 31st March 2024 is the due date for filing Income tax return FY 2020-21 and FY 2021-22. For FY 2020-21 it will be the last opportunity to file updated return with 50% penalty and for FY 2021-22 it will be the last opportunity to file updated return with 25% penalty. After 31.03.2024 if you wish to file updated return for FY 2021-22 you will have to pay 50% of total tax payable.

In a brief note updated return can be filed only by an assessee if there is any tax payable by the assessee during the year under consideration. Assessee is liable to pay

25% penalty of total tax payable if he files updated return within 12 months from the end of relevant assessment year for which the return is required to be filed and

50% penalty of total tax payable if he files updated return within 24 months from the end of relevant assessment year for which the return is required to be filed.

Now let’s discuss what all credit will be available to assessee while filing his return of income, such information is available in Section 140B of the Income tax act. Relevant extract of Section 140B is as under:

(1) Where no return of income under sub-section (1) or sub-section (4) of section 139 has been furnished by an assessee and tax is payable, on the basis of return to be furnished by such assessee under sub-section (8A) of section 139, after taking into account,—

(i) the amount of tax, if any, already paid as advance tax;

(ii) any tax deducted or collected at source;

(iii) any relief of tax claimed under section 89;

(iv) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India;

(v) any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and

(vi) any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD,

the assessee shall be liable to pay such tax together with interest and fee payable under any of the provisions of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, along with the payment of additional income-tax computed in accordance with sub-section (3), before furnishing the return and the return shall be accompanied by proof of payment of such tax, additional income-tax, interest and fee.

(2) Where, return of income under sub-section (1) or sub-section (4) or sub-section (5) of section 139 (referred to as earlier return) has been furnished by an assessee and tax is payable on the basis of return to be furnished by such assessee under sub-section (8A) of section 139,—

(a) after taking into account,—

(i) the amount of relief or tax referred to in sub-section (1) of section 140A, the credit for which has been taken in the earlier return;

(ii) tax deducted or collected at source, in accordance with the provisions of Chapter XVII-B, on any income which is subject to such deduction or collection and which is taken into account in computing total income and which has not been included in the earlier return;

(iii) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India on such income which has not been included in the earlier return;

(iv) any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section on such income which has not been included in the earlier return;

(v) any tax credit claimed, to be set off in accordance with the provisions of section 115JAA or section 115JD, which has not been claimed in the earlier return; and

(b) as increased by the amount of refund, if any, issued in respect of such earlier return.

If we look at the first scenario mentioned above where no return has been filed we can see that there we get credit of advance tax, TDS, credit of tax paid outside India, relief under section 89 or 90A etc. However, in the above details one of the scenario has not been considered, wherein a person who was required to file Income tax return for FY 2022-23 paid self assessment tax but could not file Income tax return or belated return due to some reason.

Now, legally speaking as per above provision he should not be allowed the credit of self assessment tax paid by him. Hence, while filing the return he cannot mention any challan in Income tax return under self assessment tax. However, when he wishes to mention such challan as challan paid under section 140B and ready to pay penalty on such challan although the challan was paid earlier at the time of filing original return of income, system will not allow it.

For eg: An assessee had paid a self assessment tax challan of Rs. 50000 on 31.07.2023, now because of some reason he could not file return of income. Now, in March 2024 he wishes to file updated return. Now when he tries to use this challan as per the law he cannot declare it as self assessment tax challan as he has not filed return of income and he won’t get it’s credit and when he declares it as challan u/s 140B of the Act system says that challan u/s 140B of the Act can only be paid after 31st December of the relevant assessment year.

Hence, now this is a practical difficulty where a clarification is sought from Income tax department of how to disclose such challan where no return was filed by assessee but self assessment tax has been paid by assessee before 31st December of the relevant year?

Further, with regard to updated return where earlier returns were filed assessee is allowed to take credit of only the things for which credit was not taken in original return.

However, here also there are two important things to consider:

1. In case of updated return filed after some return was filed for that assessment yar no credit is allowed for advance tax challan if the same was not considered in earlier return.

2. If assessee has received advance tax for earlier return filed and now since he can file updated return only if there is tax payable so in such case assessee needs to offer such refund along with interest on such return for tax in updated return.

Guidance on above article for Indian Income Tax by:

Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: naman.maloo@jainshrimal.in | LinkedIn: Naman Maloo

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