How to Correct Errors in Reported Income Using ITR-U and Avoid Penalties Under Section 139

Filing Income Tax Returns (ITR) is a crucial process for taxpayers in India. However, errors during the filing process can lead to complications, including penalties and delays in refunds. To address such errors and facilitate accurate tax filings, the Income Tax Department introduced the ITR-U (Income Tax Return - Updated) mechanism. The ITR-U allows taxpayers to correct mistakes or omissions in their previously filed returns. This provision is particularly useful for those who discover errors in their returns after they have already been submitted.

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Table of Contents

• What is ITR-U?

• Step-by-Step: How to Correct Errors Using ITR-U

• How to Avoid Penalties Under Section 139

• Conclusion

• FAQs

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What is ITR-U?

The ITR-U (Income Tax Return - Updated) is a provision introduced by the Income Tax Department under Section 139(8A) of the Income Tax Act. This facility allows taxpayers to correct mistakes or omissions in their previously filed ITR without facing penalties or legal consequences, provided they follow the prescribed guidelines.

ITR-U can be filed for any assessment year, even after the assessment year has been completed, as long as the original ITR was filed and there was a mistake or omission. The updated return offers an opportunity to make corrections such as:

• Incorrect income reporting

• Incorrect claims for deductions

• Errors in tax payments or TDS credits

• Misreporting of exemptions or other tax details

It’s important to note that the updated return must be filed before the completion of the relevant assessment year.

Step-by-Step: How to Correct Errors Using ITR-U

If you realize that there were errors in your filed ITR, here’s how you can correct them using the ITR-U:

• Log into the Income Tax Portal: Visit the official Income Tax Department website and log in using your PAN, password, and CAPTCHA.
  

• Navigate to the 'Income Tax Returns' Section: Once logged in, go to the 'e-File' section and select 'Income Tax Returns'. Here, you will find an option for filing an updated return (ITR-U).
  

• Select the Relevant Assessment Year: Choose the assessment year for which you want to file the updated return. This should correspond to the year in which you filed the original ITR.
  

• Choose the Correct ITR Form: Select the appropriate ITR form based on your income sources and the type of taxpayer (individual, business, etc.). Ensure you choose the form that matches the original ITR you filed.
  

• Fill in the Correct Details: Make the necessary corrections to your income, deductions, exemptions, or tax payments. You must ensure that all the corrected information is accurate and properly filled out.
  

• Submit the Updated Return: Once all errors are corrected, submit the updated return. You will be asked to verify the changes before submission.
  

• Payment of Taxes (if applicable): If the updated return results in an additional tax liability, you must make the necessary payment before submitting the return. This ensures that you are compliant with tax laws.
  

• E-Verification: Finally, e-verify the return either through OTP, Aadhar-based authentication, or by sending a signed physical copy to the Income Tax Department. The e-verification is mandatory for completing the filing process.

After submitting, the updated return will be processed, and if the corrections lead to a refund, it will be issued as per the guidelines of the Income Tax Department.

How to Avoid Penalties Under Section 139

Under Section 139 of the Income Tax Act, taxpayers are required to file their Income Tax Returns (ITR) within the prescribed time limit. Failing to comply with these timelines or making errors in your filing can lead to penalties and interest being levied on the outstanding taxes. However, with some careful planning and attention to detail, taxpayers can avoid such penalties. Let’s explore the critical steps to help you remain compliant and avoid penalties under Section 139.

1. File on Time

The most straightforward way to avoid penalties under Section 139 is to file your ITR on time. For the Financial Year 2024-25 (Assessment Year 2025-26), the deadline for individual taxpayers to file their returns is September 15, 2025. Filing after the due date will result in a penalty under Section 234F. The penalty for late filing depends on how late the return is filed and can range from ₹1,000 to ₹10,000:

• Up to ₹5,000 for returns filed after the due date but before December 31, 2025.

• ₹10,000 for returns filed after December 31, 2025.

For taxpayers with an income of less than ₹5 lakh, the penalty may be reduced to ₹1,000. The key takeaway is to file within the specified deadlines to avoid any penalty under Section 234F.

2. Accurate Reporting

Accurate reporting of income, deductions, exemptions, and TDS credits is essential to avoid penalties and interest. Under Section 139, the Income Tax Department assesses the return to verify its accuracy. If discrepancies or mistakes are found during the assessment process, the taxpayer may be subject to penalties and additional taxes. Common issues that can trigger penalties include:

• Underreporting of income: If you fail to report income from salary, business, or investments, or if you understate your earnings, you may face penalties for underreporting.
  

• Incorrect deductions or exemptions: Claiming deductions or exemptions you are not eligible for, or failing to claim eligible deductions, can result in penalties.
  

• Mismatch in TDS: Failing to correctly report the TDS amounts deducted by your employer or other entities can cause delays and penalties. If the TDS claimed is more than the actual TDS paid, this can also result in tax liabilities.

To ensure accurate reporting, cross-check your income statements, tax calculations, and any supporting documents like Form 16, bank statements, and investment proof before submitting your return.

3. File a Revised Return

If you realize that you have made an error in your ITR after filing, don’t panic. The Income Tax Act allows you to file a revised return to correct mistakes, provided you do so before the end of the assessment year. This is a valuable opportunity to amend any discrepancies, such as missed income, incorrect deductions, or TDS mismatches. Filing a revised return ensures that the error is rectified, and you avoid additional penalties or fines.

The process for revising an ITR is straightforward. You need to go back to the Income Tax Department’s e-filing portal, select the option to file a revised return, and submit the corrected information. The revised return can only be filed within the assessment year, so be sure to do this promptly.

Additionally, the introduction of ITR-U (for updated returns) allows taxpayers to make corrections after the assessment year, without incurring penalties, as long as the error is corrected within the specified timeline. If the mistake is corrected early, it minimizes the risk of penalties.

4. Avoid Non-Compliance

Non-compliance with tax provisions, such as failing to file TDS returns, submitting incomplete tax deductions, or missing other mandatory filings, can lead to penalties. The Income Tax Department may impose additional penalties if you fail to comply with these regulations. Some common causes of non-compliance include:

• Failure to deduct or deposit TDS: TDS should be deducted from payments such as salary, interest, or contractor payments, and deposited with the government. If TDS is not deducted, or is not deposited by the due date, penalties will apply.
  

• Non-filing of TDS returns: Businesses and professionals must file TDS returns on a quarterly basis. Missing the TDS return filing deadline may result in fines and penalties.
  

• Non-compliance with advance tax payments: If you are required to pay advance tax and fail to do so, penalties under Section 234Band 234C will apply. Additionally, interest will be charged on any unpaid taxes.

To avoid such penalties, stay up to date on TDS and advance tax deadlines and ensure all necessary filings are completed within the prescribed timelines.

5. Keep Documentation Ready

One of the most effective ways to ensure that your ITR is filed accurately and on time is to keep all the necessary documentation in order. Having your documents ready before filing reduces the chances of errors and ensures that you don’t miss out on any eligible deductions or exemptions. Essential documents to keep handy include:

• Salary Slips: These provide the details of your income and the TDS deducted by your employer. Ensure that the TDS reported matches the details on Form 16.
  

• Bank Statements: For reporting interest income and verifying any other taxable income such as dividends, rental income, etc.
  

• Investment Proofs: These are needed for claiming deductions under sections like 80C, 80D, etc., for investments made in life insurance, PPF, EPF, mutual funds, etc.
  

• Form 16: This is issued by your employer and provides a summary of your salary income and the TDS deducted during the financial year.
  

• Advance Tax Receipts: If you are liable for paying advance tax, make sure you have proof of payments made.

By ensuring that all documents are organized and available for reference, you can avoid errors that could lead to penalties. Additionally, proper documentation can help if the Income Tax Department requires clarification or verification of any information provided in your return.

Conclusion

ITR-U provides taxpayers a valuable opportunity to correct mistakes in their previously filed returns without the risk of penalties, provided it’s done before the end of the assessment year. This process is crucial for anyone who has discovered errors, as it allows them to avoid the consequences of misreporting and ensure they comply with tax laws. By following the correct steps for filing ITR-U and ensuring timely and accurate filings, you can avoid penalties under Section 139 and ensure smooth processing of your tax return.

For further assistance in filing your returns or correcting mistakes, it is highly recommended downloading theTaxBuddy mobile app for a hassle-free experience.

Frequently Asked Question (FAQs)

Q1: What is the deadline for filing ITR-U?

The updated return (ITR-U) must be filed before the completion of the relevant assessment year. For example, for FY 2024-25, the return must be filed by March 31, 2026. After this date, the opportunity to file an ITR-U will expire.

Q2: What errors can be corrected using ITR-U?

ITR-U allows you to correct a variety of errors, such as incorrect income reporting, missing deductions, wrongly reported TDS credits, or other filing omissions. It is particularly helpful for taxpayers who need to amend mistakes in their previously filed returns.

Q3: Can I file an ITR-U if I have already received a notice?

Yes, you can file an ITR-U to correct mistakes even if you have received a notice from the Income Tax Department. Filing an ITR-U helps resolve discrepancies before further action is taken by the tax authorities.

Q4: Is there a penalty for filing an ITR-U?

No, there is no penalty for filing an ITR-U, provided it is done within the prescribed timeframe. However, if the corrected return results in additional tax liability, you must pay it to avoid any interest charges or penalties.

Q5: Can I claim deductions through ITR-U that I missed in the original return?

Yes, you can claim deductions that were missed in your original return when filing ITR-U, as long as they are allowed under the Income Tax Act. This includes deductions like those for investments under Section 80C, 80D, and others.

Q6: What happens if I file an incorrect ITR-U?

If you file an ITR-U with further errors or omissions, the tax department may reject it, and you may need to file a corrected return. It is essential to double-check your information to avoid additional complications.

Q7: How do I know if ITR-U has been accepted?

Once your ITR-U is processed, you will receive an acknowledgment from the Income Tax Department. You can track the status of your ITR-U on the e-filing portal to confirm whether it has been accepted.

Q8: Can I file an ITR-U if I have missed the original due date for filing my ITR?

Yes, ITR-U can be filed even if you missed the original due date for filing your ITR. As long as you file it within the assessment year, you can use ITR-U to correct mistakes and avoid penalties.

Q9: Can TaxBuddy help with filing an ITR-U?

Yes, TaxBuddy can assist you in filing an ITR-U and ensuring all necessary corrections are made accurately. TaxBuddy provides guidance to ensure that your return is filed correctly, reducing the chances of errors and penalties.

Q10: Is ITR-U only for individuals, or can businesses file it too?

ITR-U can be filed by both individuals and businesses. Whether you are a salaried individual or a business entity, you can use ITR-U to correct mistakes or omissions in your original tax return.

Q11: Do I need to file ITR-U if my original return was filed correctly but I missed some deductions?

Yes, if you missed deductions or made any other omissions in your original return, you can file ITR-U to correct these errors. Filing an ITR-U allows you to claim missed deductions and avoid penalties.

Q12: Can I use ITR-U to report additional income after filing the original return?

Yes, ITR-U can be used to report additional income that was missed in the original filing. It allows taxpayers to correct discrepancies, including unreported income, and avoid penalties for non-disclosure.