1. Financial Year (FY) & Assessment Year (AY)

• Financial Year (FY): The 12-month period in which you earn income (e.g., FY 2023-24: April 1, 2023 – March 31, 2024).
• Assessment Year (AY): The year in which you file returns for the income earned in the previous FY (e.g., AY 2024-25 for FY 2023-24).

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2. Types of Income

Income is classified into five categories:

1. Salary Income – Earnings from employment.
2. Income from House Property – Rental income or deemed rental value.
3. Income from Business/Profession – Profits from business or self-employment.
4. Capital Gains – Income from selling assets like property, stocks, or mutual funds.
5. Other Sources – Interest, dividends, gifts, or lottery winnings.

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Here’s a comparison of the Basic Exemption Limit (BEL) under the New Tax Regime and Old Tax Regime for Budgets 2024 and 2025:

Old Tax Regime:

1. Budget 2024:
   • BEL for individuals below 60 years: ₹2.5 lakh.
   • BEL for senior citizens (60–80 years): ₹3 lakh.
   • BEL for super senior citizens (above 80 years): ₹5 lakh.
2. Budget 2025:
   • No changes; the limits remain the same as Budget 2024.

New Tax Regime:

1. Budget 2024:
   • BEL for all taxpayers: ₹3 lakh (uniform across all age groups).
2. Budget 2025:
   • BEL increased to ₹4 lakh for all taxpayers (uniform across all age groups).

3. Income Tax Slabs & Regimes

There are two tax regimes in India:

• Old Regime – Allows tax deductions and exemptions.
• New Regime – Lower tax rates but fewer deductions.

Here’s the comparison of Income Tax Slabs under the Old Tax Regime and New Tax Regime for Budgets 2024 and 2025 in a table format:

Category	Old Tax Regime (2024)	Old Tax Regime (2025)	New Tax Regime (2024)	New Tax Regime (2025)
Basic Exemption Limit (BEL)	₹2.5 lakh (below 60 years)	₹2.5 lakh (below 60 years)	₹3 lakh	₹4 lakh
	₹3 lakh (senior citizens: 60-80 years)	₹3 lakh (senior citizens: 60-80 years)
	₹5 lakh (super senior citizens: 80+ years)	₹5 lakh (super senior citizens: 80+ years)
Rebate (Section 87A)	Up to ₹12,500 (income up to ₹5 lakh)	Up to ₹12,500 (income up to ₹5 lakh)	Up to ₹25,000 (income up to ₹7 lakh)	Up to ₹60,000 (income up to ₹12 lakh)
Income Tax Slabs
Up to BEL	No tax	No tax	No tax	No tax
BEL to ₹5 lakh	5%	5%	5% (₹3–₹7 lakh)	5% (₹4–₹8 lakh)
₹5 lakh to ₹10 lakh	20%	20%	10% (₹7–₹10 lakh)	10% (₹8–₹12 lakh)
₹10 lakh to ₹12 lakh	30%	30%	15%	15% (₹12–₹16 lakh)
₹12 lakh to ₹15 lakh	30%	30%	20%	20% (₹16–₹20 lakh)
Above ₹15 lakh	30%	30%	30%	30% (above ₹24 lakh)
Standard Deduction	₹50,000	₹50,000	₹75,000	₹75,000

This table highlights the differences in tax slabs and limits for both regimes. Let me know if you’d like additional details or further clarifications!

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Rebate Limit:

Here’s a comparison of the rebate under the Old Tax Regime and the New Tax Regime:

Old Tax Regime:

• Rebate Limit: Income up to ₹5 lakh is eligible for a rebate under Section 87A.
• Rebate Amount: Maximum rebate of ₹12,500.
• Deductions: Offers multiple deductions and exemptions, such as:
  • Section 80C (Investments like PPF, ELSS, etc.).
  • Section 80D (Health insurance premiums).
  • House Rent Allowance (HRA), Leave Travel Allowance (LTA), and more.

New Tax Regime:

• Rebate under Section 87A: No tax if taxable income is up to ₹7 lakh under the new regime (as per Budget 2024).
• Rebate Limit: Income up to ₹12 lakh is eligible for a rebate under Section 87A (as per Budget 2025).
  • Rebate Amount: Maximum rebate of ₹60,000.
• Deductions: Limited deductions are available, but it includes:
  • Standard deduction of ₹75,000 for salaried individuals.
  • Employer’s contribution to NPS under Section 80CCD(2).

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Standard Deduction

Here’s a breakdown of the Standard Deduction for salaried individuals under the Old Tax Regime and New Tax Regime for Budget 2024 and 2025:

Budget 2024:

• Old Tax Regime: ₹50,000.
• New Tax Regime: ₹75,000 (increased from ₹50,000 as per Budget 2024).

Budget 2025:

• Old Tax Regime: ₹50,000 (no change from Budget 2024).
• New Tax Regime: ₹75,000 (remains the same as Budget 2024).

The increase in the standard deduction under the New Tax Regime in Budget 2024 was aimed at making it more attractive for salaried individuals.

Key Differences:

• The Old Tax Regime is beneficial for individuals who can claim significant deductions and exemptions.
• The New Tax Regime offers simplified tax slabs and higher rebate limits, making it advantageous for those with fewer deductions.

Your choice depends on your income structure and the deductions you can claim.

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4. Tax Deductions & Exemptions

Here’s a comparison of deductions allowed and not allowed under the New Tax Regime and Old Tax Regime in a table format:

Category	Old Tax Regime	New Tax Regime
Standard Deduction	₹50,000	₹75,000
Section 80C (Investments)	Allowed (e.g., PPF, ELSS, LIC premiums, etc.)	Not allowed
Section 80D (Health Insurance)	Allowed (₹25,000 for individuals, ₹50,000 for senior citizens)	Not allowed
Section 80CCD(1B) (NPS)	Allowed (₹50,000 additional deduction)	Not allowed
Section 80CCD(2) (Employer NPS)	Allowed (up to 10% of salary)	Allowed (up to 14% of salary for central government employees)
House Rent Allowance (HRA) – 10(14)	Allowed	Not allowed
Leave Travel Allowance (LTA)	Allowed	Not allowed
Interest on Housing Loan (Section 24 (b)	Allowed (₹2 lakh for self-occupied property)	Not allowed
Transport Allowance	Allowed (for specially-abled individuals)	Allowed (for specially-abled individuals)
Daily Allowance	Allowed	Allowed
Gratuity (Section 10)	Allowed	Allowed
Voluntary Retirement Scheme (VRS)	Allowed	Allowed
Children Education Allowance	Allowed	Not allowed
Donations (Section 80G)	Allowed	Not allowed
Food Allowance	Allowed (₹50/meal subject to 2 meals/day)	Not allowed

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5. TDS (Tax Deducted at Source) & Form 26AS

• TDS is deducted by employers, banks, and others on salary, FD interest, etc.
• Form 26AS is a consolidated statement showing TDS deducted, tax paid, and refunds.

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6. Advance Tax & Self-Assessment Tax

• Advance Tax: If tax liability exceeds ₹10,000 in a year, it must be paid in installments.
• Self-Assessment Tax: The remaining tax paid before filing ITR.

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7. Form 16 & Other ITR Forms

• Form 16 – Issued by employers showing salary details & TDS.
• Form 16A – For TDS on non-salary income (FDs, professional fees, etc.).
• ITR Forms: Here’s a summary of the different Income Tax Return (ITR) forms and their applicability:

1. ITR-1 (Sahaj)

• For: Resident individuals with income up to ₹50 lakh.
• Sources of Income:
  • Salary or pension.
  • One house property (with no brought forward loss).
  • Other sources like interest income.
• Exclusions: Not for individuals with capital gains, business or profession, foreign income, foreign assets or more than one house property.

2. ITR-2

• For: Individuals and Hindu Undivided Families (HUFs) with income from sources other than business or profession.
• Sources of Income:
  • Salary or pension.
  • Multiple house properties.
  • Capital gains (short-term or long-term),
  • Foreign income or assets.

3. ITR-3

• For: Individuals and HUFs with income from business or profession.
• Sources of Income:
  • Business or professional income.
  • Salary or pension.
  • Capital gains.
  • Multiple house properties.
• Key Features:
  • This form is for those who are not eligible to file ITR-4 under the presumptive taxation scheme.
  • Requires detailed reporting of profit and loss, and it is ideal for taxpayers with complex business or professional income.

4. ITR-4 (Sugam)

• For: Individuals, HUFs, and firms (excluding LLPs) opting for the presumptive taxation scheme under Sections 44AD, 44ADA, or 44AE.
  • Typically, those with a turnover up to ₹2 crore for business income.
• Sources of Income:
  • Presumptive income from business or profession.
  • Salary or pension.
  • One house property.
  • Other sources like interest income.
• Designed for small taxpayers with straightforward business or professional income.

5. ITR-5

• For: Partnership firms, LLPs, Association of Persons (AOPs), Body of Individuals (BOIs), and Artificial Juridical Persons (AJPs).
• Sources of Income:
  • Business or professional income.
  • Capital gains.
  • Other sources.

6. ITR-6

For: Companies (excluding those claiming exemptions under Section 11 for charitable purposes).

• Sources of Income:
  • Business income.
  • Other sources.

7. ITR-7

• For: Entities like trusts, political parties, scientific research institutions, and universities filing returns under Sections 139(4A), 139(4B), 139(4C), or 139(4D).
• Sources of Income:
  • Income from property held for charitable or religious purposes.
  • Voluntary contributions.

Summary Table

ITR Form	Applicable To	Key Income Sources Covered
ITR-1 (Sahaj)	Resident individuals with simple income (salary, one house property, interest)	Salary, pension, one house property, interest income
ITR-2	Individuals/HUFs with additional income (capital gains, multiple properties, foreign income)	Capital gains, multiple house properties, foreign assets/income
ITR-3	Individuals/HUFs with income from business or profession (not under presumptive scheme)	Business or professional income
ITR-4 (Sugam)	Taxpayers opting for the presumptive taxation scheme (individuals, HUFs, firms)	Presumptive business/professional income
ITR-5	Firms, LLPs, AOPs, BOIs, AJPs	Income of non-individual entities
ITR-6	Companies (excluding presumptive taxation)	Company income and tax details
ITR-7	Specialized entities like trusts, political parties, institutions	Income from specified non-profit or statutory bodies

Each form is tailored to specific taxpayer categories and income sources.

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8. Filing Deadline & Late Fees

• ITR filing deadline: July 31 (individuals) & October 31 (auditable cases).
• Late fees: ₹1,000 (income < ₹5 lakh), ₹5,000 (income > ₹5 lakh).

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9. Refunds & Rectifications

• Tax Refund: If excess TDS is deducted, a refund can be claimed after ITR processing.
• Rectification (Section 154): If there are errors in filed returns, corrections can be made.

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10. E-Verification of ITR

ITR must be verified via:

• Aadhaar OTP
• Net banking
• DSC (for companies)
• Sending signed ITR-V to CPC, Bengaluru

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Return of Income:

A return of income is a form that a person or business must fill out to to the government every year, stating how much money you earned, how much tax you owe, and how much tax you’ve already paid.

• The Income-tax Act, 1961 has rules about how and when to file this return.
• The Central Board of Direct Taxes (CBDT) decides the format for different types of taxpayers.
• In this return, you provide details like:
  • How much money you earned from different sources (salary, business, rent, etc.).
  • The total income before and after deductions.
  • The tax amount that needs to be paid.

In simple terms, filing a return of income means telling the government how much you earned and paying taxes accordingly.

Compulsory Filing of Income Tax Return (Section 139(1)) – Explained Simply

1. Who Must File a Return?
   • Companies and Firms including LLP:
     • All companies and firms (whether they made a profit, loss, or have zero income) must file their income tax return every year before the deadline (called “due date”) using the prescribed form.
   • If business turnover exceeds ₹10 crore (from FY 2023-24), ITR filing is mandatory.
   • Those under the presumptive taxation scheme (e.g., Section 44AD, 44ADA) also need to file ITR.
   • Individuals & Other Entities:
     • If you’re not a company or firm, if their total income exceeds the basic exemption limit (₹3,00,000 or ₹2,50,000 based on the tax regime).
     • The basic exemption limit varies based on age and tax regime:
       • ₹3,00,000 for most individuals under the default tax regime.
       • ₹2,50,000 for those opting out of the default tax regime.
       • ₹3 lakh: Senior citizens (aged 60–80 years).
       • ₹5 lakh: Super senior citizens (80+ years old).
     • Example: Salaried Individual aged 30 years having yearly Salary of Rs.4,00,000
       • Myth: He thinks he is not required to file ITR as No TDS was deducted.
       • Fact: Even though TDS was not deducted but as his Income exceeds the basic exemption limit, it is mandatory for him to file ITR.
2. Additional Rules for Residents with Foreign Assets
   • If a person (other than a company or firm) If you live in India and hold foreign assets (like bank accounts or property outside India) or have signing authority over a foreign account, you need to file a tax return—even if your income is below the exemption limit.
   • However, if the income from such an asset is already included in someone else’s income, the individual doesn’t have to file a separate return.
   • You need to file an Income Tax Return even if you are an authorized signatory for an account managed outside of India. The asset you hold outside of India may be movable or immovable.
   • For example,
     • if you went abroad, opened an account, and forgot to close it upon returning to India, you must file an ITR.
     • Mr. Sharma, an Indian resident, holds a bank account in the USA. He must file an ITR, even if his total income is below ₹2,50,000.
3. For Carrying Forward Losses from business/profession or under capital gains head:
   • If you have losses from stocks, business, property, or mutual funds, filing an ITR allows you to carry forward these losses to set off against future income.
   • Example: If you had a ₹1 lakh capital loss in FY 2023-24 and file an ITR, you can use it to reduce future capital gains tax.
4. If TDS Is Deducted and want to claim an income tax refund.
   • If tax has been deducted at source (TDS) but your total tax liability is less than the TDS deducted, you should file an ITR to claim a refund.
   • Example: You earned ₹3 lakh in a financial year and ₹5,000 was deducted as TDS from your FD interest. You can file an ITR to claim this refund.
5. Other Conditions Requiring Mandatory Return Filing
   If a person (other than a company or firm) meets any of these conditions, they must file a return, even if their income is below the exemption limit:
   • Current Account Deposits of more than Rs. 1 Crore – If an individual deposits Rs.1 crore or more in one or more current accounts during the financial year, then he/she must file an ITR.
     • However, no such requirement has been specified for deposits made in with post office current accounts.
   • If an individual spends Rs.2 lakh or more on foreign travel for himself or for another person during the financial year, then such an individual has to file an ITR.
   • Paid more than ₹1 lakh for electricity consumption.
   • Business : Annual Sales Turnover above Rs.60 lakhs – Individuals having an annual sales turnover of more than Rs.60 lakh are required to file an ITR.
   • Professional income above Rs.10 lakh – If the professional income exceeds Rs.10 lakhs during a financial year, then he/she has to file an ITR.
   • Total tax deducted at source (TDS) or tax collected at source (TCS) was ₹25,000 or more (₹50,000 for senior citizens).
   • Total savings bank deposits exceeded ₹50 lakh in the year:
     • If the annual savings bank deposit of an individual in one or more accounts exceeds Rs.50 lakhs, then, such individual must file ITR.
6. If You Have Received a Notice from the Income Tax Department
   • If you receive an IT department notice asking you to file an ITR, you must comply.

Deadline for ITR Filing

Particulars	Due Date (in AY)
ITR filing for individuals and entities not liable for tax audit	31st July
ITR filing for taxpayers covered under the tax audit (other than transfer pricing cases)	31st Oct
ITR filing for taxpayers covered under transfer pricing	30th Nov
Due date for revised return/belated return of income	31st Dec

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Who is NOT Required to File ITR?

•  If your total gross income is below the exemption limit and you don’t meet the conditions above, you don’t need to file ITR.
•  If you are an NRI with income only from NRE fixed deposits (which is tax-free), ITR filing is not mandatory.
• Section 194P, which was introduced in Budget 2021, provides conditional relief to citizens above 75 years of age from filing income tax returns. However, this exemption is subject to the following conditions –
  • Senior citizens should be more than 75 years of age.
  • Senior citizens should be ‘Resident’ in India in the previous years.
  • He earns income from interest and pension only. The interest income earned should be from the same bank in which he/she is receiving pension income.
  • The senior citizen has to file a declaration stating some details with the specified bank.
  • The bank must be a specified bank as notified by the Central Bank. Such banks will deduct the TDS of senior citizens after considering the deductions and rebates. After such TDS deduction, senior citizens will not be required to file income tax returns.

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What if I Fail to File my ITR?

If you fail to file an ITR by the due date, there can be various consequences. Given below is a list of the consequences.

ITR not Filed by 31st July 2024

• Late filing fees of up to Rs 5,000 (for incomes above Rs 5 lakhs) or Rs 1,000 (for incomes below Rs 5 lakhs) may be levied under Section 234F for late filing.
• As per section 234A, the taxpayer has to pay interest @1% for every month or part of the month thereof, starting from the date following the ITR filing due date, i.e. 31st July.
• If you fail to file ITR on time, you will not be eligible to receive the benefit of carry forward of losses.

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Why e-File Income Tax Return

A significantly large number of returns are e-filed, and gradually the income tax department is hoping to bring all returns online. It is mandatory to file the income tax returns online for all the registered taxpayers whose taxable income.

However, paper returns can be filed by those above 80 years of age who do not have any income from regular business or professional income.

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Important Points to Remember:

• Financial Year (FY) vs. Assessment Year (AY):
  • The FY is the year in which you earn income (e.g., April 1, 2024, to March 31, 2025).
  • The AY is the year following the FY, in which you file your ITR (e.g., April 1, 2025, to March 31, 2026).  
• Advance Tax:
  • There are also deadlines for paying advance tax in installments throughout the financial year.

Differentiate between regular ITR filing and filing an “updated return” (ITR-U).

Regular ITR Filing:

• Typically, there are deadlines for filing your ITR for a particular financial year. After the end of the assessment year, there is a deadline for belated returns. So there is a limit on how long after the end of a financial year, a regular ITR can be filed.

ITR-U (Updated Return):

• The ITR-U allows taxpayers to update their previously filed returns or file a return if they missed the original deadline.
• taxpayers can now file or update their returns for up to 2 years from the end of the relevant assessment year. (Total 3 Years from FY)
  • If you missed filing for FY 2021-22, you can file or update it through ITR-U until March 31, 2025.
• Here’s the key update:
  • As per the information available, and especially with the budget 2025 updates, the time limit to file an ITR-U has been extended. It is now 4 years from the end of the relevant Assessment Year.
• This means that taxpayers have an extended window to correct errors or report missed income.
• It is very important to know that there are extra taxation implications when filing an ITR-U.

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The Income Tax Return (ITR) filing due dates in India depend on the type of taxpayer. Here are the key deadlines:

1. Individuals /HUF/AOP/BOI etc..& Non-Audit Cases: July 31, of the assessment year.
   • Includes salaried individuals, freelancers, and businesses not requiring an audit.
2. Businesses & Professionals Requiring Audit: October 31, of the assessment year.
   • If tax audit is applicable under Section 44AB (e.g., businesses exceeding turnover limits).
3. Businesses Requiring TP Report (Transfer Pricing): November 30, of the assessment year.
   • Applicable to companies with international transactions with associated enterprises.
4. Belated & Revised Return Deadline: December 31, of the assessment year.
   • If you miss the regular deadline, you can file a belated return with a penalty.
   • Revised returns can be filed to correct errors in the original return.
5. If you missed filing for previous years, you may request condonation of delay under Section 119(2)(b), but approval is discretionary.

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Condonation of Delay under Section 119(2)(b) vs. ITR-U (Updated Return) under Section 139(8A)

Both condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 and ITR-U (Updated Return under Section 139(8A)) provide taxpayers with mechanisms to correct or submit income tax returns after the due date, but they serve different purposes and have different conditions. Here’s a comparison:

1. Condonation of Delay under Section 119(2)(b)

What it is?

This provision allows taxpayers to request the Income Tax Department (CBDT) to condone (excuse) the delay in filing an income tax return in specific cases beyond the prescribed due date where taxpayers have a genuine reason for the delay. This is primarily used for claiming tax refunds or losses that would otherwise be denied due to the late filing.

He­re are some re­asons you might need to ask for condonation of delay:

1. You or a family me­mber got really sick or had to go to the hospital.
2. The­re was a natural disaster like a flood or hurricane­ in your area.
3. The online syste­m had problems when you tried to file­.
4. Someone else­ was slow giving you papers or info you neede­d.

To get condonation of delay, you file an application. Te­ll the tax office why you were­ late, and show proof. They look at your reason and de­cide if it’s okay.

Key Points:

• Applicable when a taxpayer fails to file the original return within the due date due to genuine reasons (e.g., medical emergencies, natural calamities).
• The taxpayer must apply for condonation of delay explaining the reason for the delay to the Principal Commissioner or CBDT, depending on the amount of refund or claim involved.
  • The department may grant relief if it finds the reason genuine.
  • Requires the approval of CBDT or the designated authority (depending on the refund amount).
  • If approved, the return is processed as if it was filed on time.
• Used only for claiming refunds or loss adjustments (carry forward benefits) i.e not for additional tax payments.

Who can apply?

• Individuals
• Companies
• Any other taxpayers eligible for filing ITR

Time Limits for Condonation Application:

• Up to ₹10 lakh refund claim: Principal Commissioner or Chief Commissioner of Income Tax can approve.
• Above ₹10 lakh refund claim: CBDT approval required.
• Generally, condonation is allowed for returns filed within six years from the end of the assessment year.

2. ITR-U (Updated Return) under Section 139(8A)

What it is?

ITR-U is a provision introduced in Budget 2022 that allows taxpayers to file an Updated Return if they have missed filing their original return or need to correct errors. It allows taxpayers to declare additional income and pay the required taxes with an additional penalty.

Key Points:

• Can be filed within 24 months from the end of the relevant assessment year.
• Taxpayers can correct omissions, errors, or disclose additional income.
  • Can be used for paying additional tax, unlike condonation of delay
• Not applicable if:
  • A search/survey has been conducted i.e Any pending assessment or search/seizure cases.
  • The return is under scrutiny.
  • It leads to lower tax liability or higher refunds i.e A refund claim.
  • A loss adjustment i.e carry forward benefits
• Requires payment of additional tax:
  • 25% of additional tax liability if filed within 12 months.
  • 50% of additional tax liability if filed after 12 months but before 24 months.

Who can file ITR-U?

• Individuals
• Companies
• Firms
• Any taxpayer who missed the original return or wants to declare additional income.

Key Differences:

Feature	Section 119(2)(b)	ITR-U (Section 139(8A))
Purpose	To allow filing of return after due date due to valid reasons (mainly to claim refunds or losses).	To update/correct past returns or file missed returns with additional tax payment.
Time Limit	Can be condoned for returns up to 6 years (depends on condonation approval).	Can be filed within 24 months from the end of the relevant assessment year.
Approval Needed?	Yes, from CBDT or Principal Commissioner.	No approval needed; can be filed directly.
Additional Tax?	No additional tax, only normal tax as per return.	Yes, 25%-50% of additional tax liability.
Refund Claim?	Allowed if condonation is approved.	Not allowed, ITR-U cannot be used for refund claims
Loss Carry Forward?	Allowed if condonation is approved.	Not allowed.
Penalty for Delay?	No penalty, but approval required	Higher tax liability (up to 50% extra)

Which One to Use?

• If you missed filing the return and want to claim a refund or carry forward losses, apply for condonation under Section 119(2)(b).
• If you missed filing the return or need to correct past returns and are willing to pay additional tax, file ITR-U under Section 139(8A).

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Disadvantages of filing Belated Return:

Filing a belated Income Tax Return (ITR) (after the due date but before December 31 of the assessment year) has several disadvantages, including penalties and loss of certain benefits. Here are the key drawbacks:

1. Late Filing Penalty (Section 234F)

• This fee varies depending on your income level.
  • If your total income is above ₹5 lakh, penalty of up to ₹5,000 is imposed if you file after the due date.
  • If your total income is below ₹5 lakh, the penalty is ₹1,000.
  • No late fee if gross income is below the basic exemption limit.

2. Loss of Carry Forward of Losses

• You cannot carry forward losses (except for house property loss) if you file a belated return. i.e Business & Profession or Speculation Business, capital losses, and other losses cannot be set off in future years.

3. Delay in Refund Processing

• If you are eligible for a tax refund, it may take longer to process since belated returns are processed later than timely filed returns.
• Even if you have already paid advance tax/TDS, interest applies if any self-assessment tax is still due.

4. Interest on Tax Due (Section 234A)

• If you have tax payable, interest at 1% per month (or part thereof) is charged on the outstanding amount until the payment is made.

5. No Interest on Delayed Refunds (Partially Affected)

• Interest on TDS refund is paid only from the date of filing (instead of from the end of the financial year).
• This means you lose interest for the delayed period before filing.

6. Higher Scrutiny Risk

• Frequent belated filings can increase scrutiny or inquiries from the Income Tax Department.

7. Limitations on Deductions and Exemptions:

• Certain deductions and exemptions (e.g., under Section 10A, 10B, and 80-IA to 80-IE) may not be available if the return is filed late.

8. No Option for Revised Return (Earlier, but now allowed under ITR-U)

• Previously, belated returns could not be revised, but now, with ITR-U (Section 139(8A)), updates are allowed within 24 months (with an additional tax payment).

If you haven’t filed your return yet, it’s best to file before December 31 to avoid losing out on refunds and carry-forward benefits.

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Disadvantages of filing Updated Return (ITR-U):

Filing an Updated Income Tax Return (ITR-U) has certain disadvantages, even though it allows taxpayers to correct omissions or missed filings from previous years. Here are the key drawbacks:

1. Additional Tax Payment (Section 140B)

• You must pay extra tax (penalty tax) when filing ITR-U:
  • 25% of additional tax liability if filed within 12 months from the end of the assessment year.
  • 50% of additional tax liability if filed after 12 months but within 24 months.
    • This additional tax is levied on top of the regular tax and interest due.
• This is a major cost, making it more expensive than filing a belated return.
• Complexity: Calculating the additional tax and ensuring accurate reporting can add complexity to the tax filing process.

2. No Refund Can Be Claimed

• ITR-U cannot be used to
  • Claim or increase a tax refund.
  • Reduce your tax liability.
  • File a nil return (Zero income) or a loss return.
• Eligibility: You must ensure that the deductions and exemptions you claim in ITR-U are legitimate and supported by proper documentation.
• One-Time Update: Once an ITR-U is filed, no further revision or correction is allowed, so it’s crucial to carefully verify all deductions and exemptions before submitting.
• If you missed filing an original return and had excess TDS deducted, you lose the refund.
• You can only use ITR-U to pay additional tax in case of under-reported income.

3. Limited Scope of Corrections (if original return is filed)

• ITR-U cannot be filed for:
  • Claiming additional deductions/exemptions missed in the original return.
  • Reducing tax liability from an earlier filed return.
  • Increasing a refund claim.
  • There are specific situations where you are ineligible to file an ITR-U, such as:
    • If a search or survey has been conducted by the Income Tax Department.
    • If assessment or reassessment proceedings are pending or completed.
    • If the assessing officer has recieved specific information regarding black money, or benami property.
    • Filing if the IT Department has already started an investigation or assessment against you.
• One-Time Update: Once an ITR-U is filed, no further revision or correction is allowed, so it’s crucial to carefully verify all deductions and exemptions before submitting.

4. Higher Scrutiny Risk

• Filing ITR-U might flag your return for scrutiny since it implies income was previously underreported.
• The Income Tax Department may conduct inquiries if they suspect intentional concealment of income.

5. Interest on Tax Due (Section 234A, 234B, 234C)

• Apart from the additional tax (25%-50%), you must also pay:
  • Interest on unpaid taxes under Section 234A, 234B, and 234C.
  • This increases the total cost significantly.

6. Limited Time to File

• ITR-U can only be filed within 24 months (two years) from the end of the relevant assessment year.
• If more than two years have passed, you cannot correct the mistake.

Conclusion:

ITR-U is useful if you missed reporting income and want to avoid future penalties or prosecution. However, the extra tax (25-50%) and no refund claim make it costly.

If you need to correct a return or claim a refund, it’s better to file a revised return (ITR-U is the last option) to ensure compliance, but it’s always advisable to file your return on time and accurately to avoid such complexities.