The budget has introduced the concept of an updated tax return, which gives taxpayers an opportunity to file an ‘updated tax return’ within two years from the end of the relevant assessment year on payment of an additional tax. Until now, taxpayers who missed the deadline to file a belated tax return or inadvertently missed out on reporting any income on their tax return (after the due date for filing a revised tax return) had no recourse in law to voluntarily offer such income to tax. This meant that the only way in which they could correct the wrong was when a tax proceeding was initiated against them, that resulted in litigation, interest and penalties. Therefore, even where the taxpayer had a genuine intent to come clean – there was no formal opportunity to do so. In this sense, the updated tax return is a key reform that should go a long way in minimizing tax disputes. There are a couple of catches here. First, the updated tax return opportunity is not available if it is utilized once a tax proceeding or investigation has been initiated against the taxpayer. Second, the opportunity is available upon payment of an add-on tax, which is 25 per cent or 50 per cent of the applicable amount of tax and interest, depending on whether the updated tax return is filed within one year or two years from the end of the relevant assessment year, respectively.
Source: Barandbench
