Income Tax 2025

Appearance

B.—Filing of return of income and processing

Return of income. ​

263(1) ​

  • (a) The following persons shall furnish a return of income for the tax year under this Act, on or before the due date:— (i) a company; (ii) a firm; (iii) a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the tax year, without giving effect to the provisions of Chapter XVII-B or provisions of Schedule VIII (Table: Sl. No. 1) or deductions allowable under Chapter IV-E (Capital Gains) or Chapter VIII, as the case may be, exceeded the maximum amount which is not chargeable to income-tax; (iv) a specified entity if its total income without giving effect to the provisions of section 11, exceeds the maximum amount which is not chargeable to income-tax; (v) a University, college or other institution as referred to in section 45(3)(a); (vi) a business trust; (vii) an investment fund as referred to in section 224; (viii) a person who has sustained a loss in the tax year under the head “Profits and gains of business or profession” or under the head “Capital gains” and who intends to claim that such loss, or any part thereof, is to be carried forward as per this Act; (ix) a person who intends to make a claim of refund under Chapter XX; (x) a person, who is a resident, other than not ordinarily resident, and who at any time during the tax year,–– (A) holds, as a beneficial owner or otherwise, any asset (including any financial interest in an entity) located outside India, or has signing authority in any account located outside India; or (B) is a beneficiary of any asset (including any financial interest in an entity) located outside India, except where any income arising from such asset is includible in the income of person referred to in item (A); (xi) a person, other than a company or firm, who during the tax year, fulfils such conditions as prescribed;
  • (b) for the purposes of this section, “due date” means the date of the financial year succeeding the relevant tax year as mentioned in the corresponding entry of column C of the Table below in respect of the persons mentioned in column B of the said Table below: ---table---

263(2) ​

  • (a) The Board may make rules providing for the prescribed form for furnishing return of income, manner of its verification and such other particulars including–– (i) the class or classes of persons who shall be required to furnish the return in electronic form or otherwise; (ii) the form and the manner in which the return may be furnished, whether in electronic form or otherwise; (iii) the documents, statements, receipts, certificates, audited reports o r any other documents which may not be furnished along with the return in electronic form but shall be produced before the Assessing Officer on demand; (iv) the computer resource or the electronic record to which the return in electronic form may be transmitted;
  • (b) the particulars prescribed under clause (a) may also include–– (i) income exempt from tax; (ii) assets of the prescribed nature and value held by the assessee as a beneficial owner or otherwise or in which he is a beneficiary; (iii) bank account and credit card held by the assessee; (iv) expenditure exceeding the prescribed limit incurred by the assessee under prescribed heads; (v) such other outgoings as prescribed; (vi) the report of any audit referred to in section 63 or a copy thereof; (vii) the particulars of the location and style of the principal place of the business or profession and all the branches thereof; (viii) the names and addresses of the partners, if any, in the business or profession; (ix) the names of the other members of the association of person or the body of individuals and the extent of the share of the assessee and the shares of all such members, in the profits of the business or profession and any branches thereof.

263(3) ​

The Central Government may, by notification, exempt any class or classes of persons, from the obligation to file a return of income under this section, subject to the conditions specified therein.

263(4) ​

Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any tax year at any time within nine months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier.

263(5) ​

If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time within nine months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier.

263(6) ​

  • (a) Any person, whether or not he has furnished a return under sub-section (1) or (4) or (5) for a tax year, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under this Act, at any time within forty-eight months from the end of the financial year succeeding the relevant tax year;
  • (b) the provisions of clause (a) shall continue to apply for a tax year if any person has sustained a loss in the said tax year and has furnished a return of loss within the due date specified under sub-section (1) and the updated return is a return of income;
  • (c) the provisions of clause (a) shall not apply for a tax year for any person, if–– (i) the updated return is a return of loss; (ii) the updated return has the effect of decreasing the total tax liability determined on the basis of return furnished under sub-section (1) or (4) or (5) for the said tax year; (iii) the updated return results in refund where no refund was due or increases the refund due on the basis of return furnished under sub-section (1) or (4) or (5) for the said tax year; (iv) an updated return has already been furnished; (v) any proceeding for assessment or reassessment or recomputation or revision of income under this Act is pending or has been completed for the said tax year; (vi) the Assessing Officer is in the possession of information in respect of such person for the said tax year regarding violation of specified laws and the same has been communicated to him prior to the date of furnishing of updated return; (vii) information for the said tax year has been received under an agreement referred to in section 159 in respect of such person and the same has been communicated to him, prior to the date of furnishing of updated return; (viii) any prosecution proceedings under the Chapter XXII have been initiated for the said tax year in respect of such person, prior to the date of furnishing of updated return; or (ix) thirty-six months have expired from the end of the financial year succeeding the relevant tax year, and any notice to show-cause under section 281has been issued in his case, except where an order has been passed under section 281(3) determining that it is not a fit case to issue notice under section 280; or (x) he is such person or belongs to such class of persons, as notified by the Board in this regard;
  • (d) a person shall also not be eligible to furnish an updated return of income, where— (i) a search has been initiated under section 247 or books of account or other documents or any assets are requisitioned under section 248 in the case of that person; (ii) a survey has been conducted under section 253, other than sub-section (4) of the said section, in the case of that person; or (iii) a notice has been issued to the effect that any money, bullion, jewellery, virtual digital asset or valuable article or thing, seized or requisitioned under section 247 or 248 in the case of any other person, belongs to that person; or (iv) a notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 247 or 248 in the case of any other person, pertain or pertains to, or any other information contained therein, relate to, that person, for the tax year in which such search is initiated or survey is conducted or requisition is made and any tax year preceding such tax year.

263(7) ​

A return of income furnished under this section, shall be treated as defective if it is not in conformity with all the conditions as prescribed and shall be dealt with in the following manner:––

  • (a) where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within fifteen days from the date of such intimation or within a further period as may be allowed on an application made by the assessee in this behalf;
  • (b) if the defect is not rectified within the period allowed under clause (a), then the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return;
  • (c) where the assessee rectifies the defect after the expiry of the period allowed under clause (a), but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.

263(8) ​

  • (a) The provisions of this section shall also apply to a return of income which is furnished in pursuance of an order passed under section 239(4)(3)(b);
  • (b) the provisions of this section shall not apply to a specified senior citizen, as referred to in section 402(39), for the relevant tax year in which tax has been deducted at source under section 393(1) [Table: Sl. No. 8 (iii)].

263(9) ​

In this section,––

  • (a) “beneficial owner”, in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person;
  • (b) “beneficiary”, in respect of an asset means an individual who derives benefit from the asset during the tax year and the consideration for such asset has been provided by any person other than such beneficiary;
  • (c) “specified entity” means–– (i) research association referred to in Schedule III (Table: Sl. No. 23); (ii) association or institution referred to in Schedule III (Table: Sl. No. 24); (iii) person referred to in Schedule VII (Table: Sl. No. 2); (iv) institution referred to in Schedule III (Table: Sl. No. 25); (v) any University or other educational institution or any hospital or other medical institution referred to in Schedule VII (Table: Sl. Nos. 17, 18 and 19); (vi) Mutual Fund referred to in Schedule VII (Table: Sl. No. 20 and 21); (vii) securitisation trust referred to in Schedule III (Table: Sl. No. 26); (viii) Investor Protection Fund referred to in Schedule III (Table: Sl. No. 28 and 29); (ix) Core Settlement Guarantee Fund referred to in Schedule III (Table: Sl. No. 30); (x) venture capital company or venture capital fund referred to in Schedule V (Table: Sl. No. 6); (xi) trade union or association referred to in Schedule III (Table: Sl. No. 31); (xii) Board or Authority referred to in Schedule VII (Table: Sl. No. 33 and 40); (xiii) Body or Authority or Board or Trust or Commission (by whatever name called) referred to in Schedule III (Table: Sl. No. 36); (xiv) infrastructure debt fund referred to in Schedule VII (Table: Sl. No. 46);
  • (d) “specified laws” shall refer to the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, or the Prohibition of Benami Property Transactions Act, 1988, or the Prevention of Money-laundering Act, 2002, or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Explanation

Section Summary: ​

Section 263 of the new income tax law outlines the requirements for filing income tax returns in India. It specifies who must file a return, the due dates, the process for filing, and the consequences of non-compliance or errors in filing. It also introduces the concept of an "updated return," allowing taxpayers to correct or update their returns within a specified time frame. The section applies to various entities, including companies, firms, individuals, and specified entities like universities, business trusts, and investment funds.

Key Changes: ​

  1. Introduction of Updated Returns: Taxpayers can now file an updated return within 48 months from the end of the relevant financial year, subject to certain conditions. This is a new provision aimed at providing flexibility to correct omissions or errors.
  2. Expanded Scope of Filing Requirements: The section now explicitly includes entities like business trusts, investment funds, and specified entities (e.g., universities, hospitals) in the list of those required to file returns.
  3. Stricter Conditions for Updated Returns: Updated returns cannot be filed if they result in a reduced tax liability, increased refund, or if certain legal proceedings (e.g., search, survey, or prosecution) are underway.
  4. Exemptions for Specified Senior Citizens: Senior citizens who have had tax deducted at source (TDS) under specific conditions are exempt from filing returns.
  5. Defective Returns: The process for handling defective returns has been clarified, with a 15-day window to rectify defects before the return is deemed invalid.

Practical Implications: ​

  1. For Individuals and Entities:
    • Taxpayers must ensure timely filing of returns to avoid penalties.
    • Those with foreign assets or signing authority over foreign accounts must file returns, even if their income is below the taxable threshold.
    • Losses can only be carried forward if the return is filed within the due date.
  2. For Businesses and Specified Entities:
    • Entities like business trusts, investment funds, and universities must file returns if their income exceeds the non-taxable threshold.
    • Detailed documentation, including audited reports, may be required.
  3. For Compliance:
    • Taxpayers must be cautious when filing updated returns, as certain conditions (e.g., pending legal proceedings) can disqualify them from doing so.
    • Defective returns must be rectified within 15 days to avoid invalidation.

Critical Concepts: ​

  1. Updated Return: A new provision allowing taxpayers to file a revised return within 48 months from the end of the financial year, subject to specific restrictions (e.g., cannot reduce tax liability or increase refunds).
  2. Beneficial Owner and Beneficiary:
    • Beneficial Owner: An individual who provides consideration for an asset, directly or indirectly, for their own or another's benefit.
    • Beneficiary: An individual who derives benefit from an asset, where the consideration was provided by someone else.
  3. Specified Entity: Includes entities like universities, hospitals, business trusts, and investment funds, which are now explicitly required to file returns.
  4. Defective Return: A return that does not meet prescribed conditions. The taxpayer has 15 days to rectify the defect; otherwise, the return is treated as invalid.

Compliance Steps: ​

  1. Determine Filing Obligation: Check if you fall under the categories of persons required to file a return (e.g., company, firm, individual with foreign assets).
  2. File by Due Date: Ensure the return is filed by the due date specified in the law (refer to the table in the section for specific due dates).
  3. Maintain Documentation: Keep all necessary documents (e.g., audited reports, bank statements) ready for submission if required.
  4. Rectify Defects: If the return is flagged as defective, rectify the issues within 15 days to avoid invalidation.
  5. File Updated Return (if applicable): If you need to correct or update your return, ensure you meet the conditions for filing an updated return (e.g., no pending legal proceedings).

Examples: ​

  1. Example 1 – Filing for Foreign Assets:

    • Mr. A, a resident of India, holds a bank account in the UK. Even if his total income in India is below the taxable threshold, he must file a return because he has signing authority over a foreign account.

  2. Example 2 – Updated Return:

    • Ms. B filed her return for FY 2022-23 but later realized she forgot to include rental income. She can file an updated return within 48 months from March 2023, provided no legal proceedings are pending against her.

  3. Example 3 – Defective Return:

    • A company filed its return but missed attaching the audited financial statements. The Assessing Officer flagged the return as defective. The company has 15 days to submit the missing documents; otherwise, the return will be treated as invalid.

This section emphasizes the importance of timely and accurate filing, while introducing new provisions like updated returns to provide flexibility for taxpayers.