Know new Deadline for revised, belated, Income Tax Returns(ITR) is reduced

Last Updated On: Feb. 10, 2021, 10:06 p.m.
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DEADLINE FOR FILING BELATED, REVISED INCOME TAX RETURN IS REDUCED

 

In Budget 2021, Finance Minister Nirmala Sitharaman proposed a reduction in the deadline for filing belated, revised ITR (Income Tax Returns) by three months from 31st March of the relevant assessment year to  31st December of the Assessment year.

This clarifies that the last date for voluntarily filing ITR for the current Financial year will be 31st December 2021.

As per the Memorandum Budget document, this change will be applicable from the assessment year April 1, 2021. The decision has been taken in wake of the technological up-gradation in the Income-Tax department where the time taken to conduct and complete such processes has greatly reduced.

 

What is Belated Return?

An income tax return filed after the due date is called a 'belated' return, while revised income tax returns are those which are filed in case of any mistake in the original tax returns such as the omission of interest income, bank account, etc.  

Usually, the taxpayers are supposed to file ITR by July 31 of the following financial year (called the assessment year). However, a taxpayer can file a belated return at any time before the end of the relevant assessment year or before completion of the assessment, whichever is earlier.  

 

Assessment Provisions in Budget 2021

Amendment in provisions of processing of returned income u/s 143(1) and the issue of notice of scrutiny assessment u/s 143(2):

  • The time limit to issue a notice for scrutiny proceedings is proposed to be reduced from 6 months to 3 months, from the end of FY in which return has been filed.
  • The time limit for sending intimation for processing the return of income u/s 143(1) is also proposed to be reduced from 12 months to 9 months, from the end of FY in which return has been filed.
  • Currently, disallowance of expenditure indicated in the tax audit report and not included in the computation of income was only allowed to be added while computing total income u/s 143(1). It is proposed to provide for an increase in income indicated in the tax audit report but not taken into account in the computation of income while processing returned income u/s 143(1).
  • It is proposed to disallow certain income-based deductions under section 10AA and section 80H to 8OTT (Chapter VI —A under heading ‘C’) if the return of income is filed after the due date and the same was not disallowed in the return of income.

 

Rationalization of Time Limit for Completion of Assessments

  • The current time limit for the completion of an assessment
  • proceedings are within 12 months from the end of the AY.
  • It is now proposed to reduce the time limit for completion of assessment including reassessment proceedings to 9 months from the end of AY.
  • The proposed amendment will be effective from AY 2021­22 i.e. FY 2020-21.

 

Table of various timelines (assuming FY 20-21):

No Timeline of Existing Proposed
1 Belated / Revised Return Earlier of
31 March 2022 or
Completion of
Assessment
Earlier of
31 December 2021 or
Completion of
Assessment
2 Processing of ITR u/s
143(1)
31st March 2023 31st December 2022
3 Selection of Scrutiny
Assessment u/s 143(2)
30 September 2022 30 June 2022
4 Completion of
Assessment u/s 143(3)
31 March 2023 31 December 2022

 

 

 

 

Budget Memorandum

  • Section 153 of the Act contains provisions in respect of the time-limit for completion of the assessment, reassessment, and re-computation under the Act. The sub-section (1) of the said section provides that the time-limit for passing an assessment order under section 143 or 144 of the Act shall be 21 months from the end of the assessment year in which the income was first assessable.
  • However, this time limit had earlier been curtailed in order to improve the efficacy and efficiency of the Department to give effect to computerization of processes under the Act. As a result, the time limit for completion of assessment proceedings under sections 143 or 144 of the Act was reduced to 18 months for A.Y. 2018-19 and 12 months for A.Y. 2019-20 and subsequent assessment years vide the Finance Act, 2017.
  • Since then, the assessment procedure has been completely overhauled by the introduction of the Faceless Assessment Scheme, 2019. The assessment procedure is now conducted in a completely faceless and jurisdiction-less way where all internal and external communication is made electronically and different aspects of the assessment procedure like verification, scrutiny of books of accounts, etc. are carried on by different units. The person-to-person interface between the taxpayer and the Department has been eliminated.
  • This team-based approach for assessment with a dynamic jurisdiction is technologically driven and very efficient. Thus, the time required for the completion of the assessment procedure needs to be further reduced.
  • The benefits of the shorter time period for scrutiny proceedings are manifold. On the one hand, it reduces the compliance burden on the taxpayers who find it easier to explain matters pertaining to a recent previous year which also improves the ease of doing business. On the other hand, it enhances the ability of the Department to detect and bring to tax any leakages of revenue as the instances of tax evasion come to the notice of the Department within a shorter span of time.

 

CONCLUSION:

Hence, it has been proposed that the time limit for completion of assessment proceedings may be reduced further by three months. Thus the time for completing of assessment is proposed to be nine months from the end of the assessment year in which the income was first assessable, for the assessment year 2021-22 and subsequent assessment years.

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