Benefits of Filing an Updated Return for Voluntary Disclosure
- Nimisha Panda
- Dec 19, 2025
- 9 min read
Filing an updated return under Section 139(8A) allows taxpayers to correct omissions, disclose previously unreported income, and regularise tax records even after the original filing deadline has passed. This extended compliance route helps avoid prosecution, reduces the risk of heavy penalties, and promotes transparent tax reporting. The provision gives taxpayers up to 48 months from the end of the assessment year to voluntarily correct mistakes, making it one of the most flexible compliance tools in the Income Tax Act. Many taxpayers use trusted platforms such as TaxBuddy to calculate the additional tax accurately and file updated returns without errors or delays.
Filing an updated return for voluntary disclosure ensures legal compliance, reduces scrutiny, and helps avoid penalties by correcting missed reporting while paying the prescribed tax, interest, and additional tax within the extended window provided under Section 139(8A).
Table of Contents
What Is an Updated Return Under Section 139(8A)?
An updated return is a special return introduced to help taxpayers voluntarily rectify past mistakes without waiting for the tax department to initiate action. It applies when income is under-reported, certain sources were omitted, or errors occurred in the original, belated, or revised return. Section 139(8A) allows filing this return within 24 to 48 months from the end of the relevant assessment year. Unlike a revised return, an updated return can be filed even when the original return was never submitted, provided the disclosure does not reduce tax liability or increase refund. It operates as a self-correction mechanism aligned with transparent tax reporting.
Why Voluntary Disclosure Matters for Taxpayers
Voluntary disclosure helps maintain compliance before discrepancies are detected through AIS, TIS, information sharing, or scrutiny. When income is declared proactively, the taxpayer avoids the reputational and legal impact of non-compliance. Tax authorities treat voluntary disclosure as a sign of good intent, resulting in a smoother compliance experience. It also reduces the risk of future notices, scrutiny, and litigation. With evolving reporting systems capturing high-value transactions across banks, mutual funds, brokers, and institutions, voluntary disclosure ensures returns match the digital trails already available with the department.
Key Benefits of Filing an Updated Return
Penalty Reduction and Prosecution Avoidance
Filing an updated return before detection helps prevent prosecution and minimises exposure to penalties for concealment or under-reporting. Instead of severe consequences, taxpayers only need to pay tax, interest, and additional tax as prescribed under Section 140B.
Extended 48-Month Filing Window
The availability of up to 48 months from the end of the assessment year gives taxpayers time to correct errors that may surface much later during financial reviews, loan applications, audits, or reconciliation with AIS/TIS.
Improved Transparency and Trust With Tax Authorities
Regularising unreported income strengthens compliance history and reduces the likelihood of scrutiny in subsequent years. It establishes trust with authorities and helps maintain a clean tax record.
How Updated Returns Strengthen Long-Term Compliance
Updated returns encourage disciplined and accurate financial reporting. Once a taxpayer files an updated return, future filings are typically more consistent due to the heightened awareness of reporting obligations. It also helps align financial statements, investment records, broker reports, and bank transactions with tax filings. Consistent voluntary compliance reduces the risk of mismatch notices and enhances the taxpayer’s reliability within the tax system. This long-term compliance also becomes beneficial when applying for visas, tenders, government registrations, or business loans, where clean records are evaluated.
Additional Tax and Interest Payable Under Section 140B
Section 140B mandates payment of self-assessment tax, interest, late fees, and an additional tax for filing an updated return. If the return is filed within 12 months from the end of the assessment year, the additional tax is 25% of the tax and interest. Filing between 12 and 24 months increases this to 50%. Beyond this, the window closes. These payments ensure that taxpayers regularising undisclosed income contribute fairly without receiving refunds through the updated return route. Platforms like TaxBuddy simplify these calculations by auto-computing updated liabilities using data from AIS, TIS, Form 26AS, and other financial records.
Impact of Updated Return on Banking and Documentation
Banks and financial institutions increasingly depend on accurate income disclosures while assessing loan applications, performing KYC verification, and determining a customer’s overall creditworthiness. The financial ecosystem has become more data-driven, with credit bureaus, lenders, and regulators relying heavily on verified ITRs to validate income streams and ensure that the taxpayer’s financial footprint matches their declared earnings.
When discrepancies appear—such as mismatches between the income reported in the return and the transactions reflected in bank statements, AIS, or TIS—loan processing often slows down. These inconsistencies can raise questions about the stability or legitimacy of income, prompting banks to request additional explanations or delay sanctioning credit facilities. Filing an updated return helps bridge this gap by aligning the taxpayer’s declared income with the actual financial activity captured digitally. Once the updated return is filed, the corrected tax record becomes a reliable document that mirrors real financial behaviour, making it easier for lenders to trust the applicant’s financial position.
This becomes especially important for individuals applying for home loans, business loans, credit cards, overdraft facilities, or account upgrades where income verification is a critical step. Borrowers with accurate and updated ITRs generally experience faster approvals because their documented income inspires confidence in repayment capacity. For self-employed individuals, small business owners, and consultants whose income flows may fluctuate, an updated return offers a chance to regularise past variations and demonstrate a more stable financial profile.
For NRIs and individuals opening high-value accounts, banks often conduct deeper scrutiny by checking tax compliance, residency details, source of funds, and transaction patterns. Updated returns play a vital role during these evaluations because they show timely rectification of errors and voluntary compliance with Indian tax laws. This strengthens the applicant’s financial credibility and reduces queries about unexplained deposits, foreign remittances, or investment inflows. Business accounts also benefit from updated returns, as they help clarify revenue movements, settle inconsistencies in earlier filings, and support documentation required for GST registration, trade finance, or working capital facilities.
Overall, filing an updated return supports a seamless banking experience by ensuring that tax filings, bank records, and financial documents all tell the same story. This reduces friction during credit assessments, enhances eligibility for financial products, and presents the taxpayer as a responsible and compliant individual in the eyes of banks and financial authorities.
Role of TaxBuddy in Filing Updated Returns
TaxBuddy assists taxpayers in identifying mismatches, computing additional tax under Section 140B, and preparing updated returns without errors. The platform integrates AIS, TIS, Form 26AS, and financial data to ensure complete disclosure. Its automated system alerts users to missing information and provides expert review to minimise future scrutiny. TaxBuddy’s experts also evaluate whether filing an updated return is the correct approach or if alternatives—such as revised returns or rectification—may be more appropriate. This guidance helps users take the safest compliance route while avoiding unnecessary tax burdens.
Conclusion
Filing an updated return enables transparent disclosure, reduces legal exposure, and ensures long-term compliance, especially in an ecosystem where financial data is increasingly digitised. It provides one of the most effective mechanisms for taxpayers to correct omissions without facing harsh consequences. For anyone seeking accurate computation and guided filing, it is recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides flexibility for all types of taxpayers by offering both self-filing and expert-assisted plans. The self-filing option is designed for individuals who are comfortable filing their return independently using an intuitive interface that auto-populates information from AIS, TIS, and Form 26AS. The expert-assisted plan is ideal for those who prefer professional review, personalised tax guidance, and help with resolving mismatches or clarifying complex income categories such as capital gains, foreign income, ESOPs, and business income. Both plans ensure accuracy, compliance, and secure filing on a trusted platform.
Q. Which is the best site to file ITR? The best platform to file ITR is one that ensures secure data handling, accurate tax computation, and guided support where necessary. The Income Tax Department’s official portal is a widely used option for taxpayers comfortable with manual filing. However, platforms like TaxBuddy offer enhanced convenience with automated data extraction, real-time mismatch detection, expert assistance, and error-free filing workflows. This makes it a preferred choice for individuals who want a smoother and more reliable filing experience with fewer chances of errors or notices.
Q. Where to file an income tax return? Income tax returns can be filed online using the government’s official e-filing portal or through authorised third-party platforms approved for secure e-filing. Many taxpayers choose platforms like TaxBuddy because they combine automation, expert review, and compliance checks in one place. These platforms help simplify the filing process by using pre-filled data, intuitive step-by-step guidance, and integrated support throughout the return preparation journey.
Q. What is an updated return under Section 139(8A)? An updated return is a special provision under Section 139(8A) that allows taxpayers to disclose income that was previously omitted or incorrectly reported. It can be filed even if the original return or belated return was never filed. This return can only be filed when it results in additional tax being paid, and it cannot be used to reduce tax liability or increase refunds. The updated return helps taxpayers regularise income and avoid penalties that may arise from discrepancies identified later.
Q. How long is the window to file an updated return? The updated return can be filed within a maximum window of 48 months (four years) from the end of the relevant assessment year. The exact timing within this window determines the additional tax payable. For example, filing within the first 12 months triggers 25% additional tax, while filing between 12–24 months triggers 50% additional tax. Beyond these timelines, the updated return facility cannot be used. This extended window helps taxpayers realign their tax records long after the original filing period has closed.
Q. What are the charges under Section 140B? Section 140B outlines the payments required when filing an updated return. These include the base tax due, interest for late payment, late fees if applicable, and an additional income tax of either 25% or 50% depending on how late the updated return is filed. The additional tax serves as a compliance cost for correcting previously undisclosed income. Updated returns must always result in positive tax liability—meaning refunds cannot be claimed through this route.
Q. Can an updated return be filed if a notice has already been issued? An updated return cannot be filed if the tax department has already identified mismatches, initiated scrutiny, or issued notices for the relevant assessment year. The provision is intended only for voluntary disclosure before any form of detection occurs. If any proceeding such as 139(9), 143(2), 148, 153A, or 153C is ongoing, taxpayers cannot use Section 139(8A) and must instead respond through the appropriate notice-compliance process.
Q. Is refund allowed in an updated return? No. The updated return cannot be used to claim or increase a refund. The law restricts this return strictly to cases where the taxpayer declares additional income and pays extra tax. This prevents misuse of the provision and ensures the filing is intended only for voluntary correction and regularisation of tax liability.
Q. Does filing an updated return reduce scrutiny? Yes. Filing an updated return shows proactive compliance, which reduces the chances of receiving future notices for mismatch or under-reporting. When income is voluntarily regularised before detection, the taxpayer’s compliance profile improves, and authorities generally view such disclosures favourably. This strengthens the tax history and helps maintain clean records for future filings.
Q. Can an updated return be filed for any assessment year? It can only be filed for the previous two assessment years that fall within the 24–48 month time window. Older years outside this period are not eligible. For example, if filing in 2025, updated returns can typically be filed for AY 2023–24 and AY 2022–23, depending on the current date and statutory cutoff.
Q. What income can be added in an updated return? Any taxable income that was previously missed or under-reported can be added. This includes salary arrears, business income that was left out, interest income, rent, capital gains from shares or property, foreign income, or any other taxable category. The updated return acts as a comprehensive correction tool to align actual income with the records reflected in AIS, TIS, bank statements, or financial documents.
Q. Does filing an updated return affect bank verification or KYC? Yes, and in a positive way. Banks increasingly rely on accurate ITRs for loan processing, credit evaluations, account upgrades, and KYC verification. An updated return helps correct inconsistencies between reported income and financial transactions visible in bank statements or AIS. This clarity improves the taxpayer’s financial profile, reduces the risk of verification delays, and strengthens eligibility for loans, credit cards, or financial products.
