Income Tax 2025

Appearance

Tax on updated return. ​

267(1) ​

Where no return of income under section 263(1) or (4) has been furnished by an assessee and, after taking into account the amounts referred to in sub-section (2), tax is payable on the basis of return to be furnished by such assessee under section 263(6), then—

  • (a) the assessee shall be liable to pay such tax together with interest and fee payable under any of the provisions of this Act for any delay in furnishing the return or any default or delay in payment of advance tax;
  • (b) such tax, interest and fee shall be payable along with the payment of additional income-tax computed as per sub-section (5), before furnishing the return; and
  • (c) the return shall be accompanied by proof of payment of such tax, additional income-tax, interest and fee.

267(2) ​

The amounts referred to in sub-section (1) shall be,—

  • (a) the amount of tax, if any, already paid as advance tax;
  • (b) any tax deducted or collected at source;
  • (c) any relief of tax claimed under section 157;
  • (d) any relief of tax or deduction of tax claimed under section 159(1) or 160 on account of tax paid in a country outside India;
  • (e) any relief of tax claimed under section 159(2) on account of tax paid in any specified territory outside India referred to in that section; and
  • (f) any tax credit claimed to be set off as per the provisions of section 206(13).

267(3) ​

Where, return of income under section 263(1) or (4) or (5) (referred to as earlier return) has been furnished by an assessee and, after taking into account the amounts referred to in sub-section (4) [as increased by the amount of refund, if any, issued in respect of such earlier return], tax is payable on the basis of return to be furnished by such assessee under section 263(6) then—

  • (a) the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any default or delay in payment of advance tax;
  • (b) such tax, interest and fee shall be payable along with the payment of additional income-tax, as computed as per sub-section (5), as reduced by the amount of interest paid under the provisions of this Act in the earlier return, before furnishing the return; and
  • (c) the return shall be accompanied by proof of payment of such tax, additional income-tax, interest and fee.

267(4) ​

The sums referred to in sub-section (3) shall be the following,—

  • (a) the amount of relief or tax referred to in section 266(1), the credit for which has been taken in the earlier return;
  • (b) tax deducted or collected at source, as per the provisions of Chapter XIX-B, on any income which is subject to such deduction or collection and which is taken into account in computing total income and which has not been included in the earlier return;
  • (c) any relief of tax or deduction of tax claimed under section 159(1) or 160 on account of tax paid in a country outside India on such income which has not been included in the earlier return;
  • (d) any relief of tax claimed under section 159(2) on account of tax paid in any specified territory outside India referred to in that section on such income which has not been included in the earlier return; and
  • (e) any tax credit claimed, to be set off as per the provisions of section 206(13), which has not been claimed in the earlier return.

267(5) ​

For the purposes of sub-sections (1) and (3), the additional income-tax payable at the time of furnishing the return under section 263(6) shall be equal to,—

  • (a) 25% of aggregate of tax and interest payable, as determined in sub-section (1) or (3), as the case may be, if such return is furnished after expiry of the time available under section 263(4) or (5) and before completion of twelve months from the end of the financial year succeeding the relevant tax year; or
  • (b) 50% of aggregate of tax and interest payable, as determined in sub-section (1) or (3), as the case may be, if such return is furnished after the expiry of twelve months but before completion of twenty-four months from the end of the financial year succeeding the relevant tax year;
  • (c) 60% of aggregate of tax and interest payable, as determined in sub-section (1) or (3), as the case may be, if such return is furnished after the expiry of twenty-four months, but before completion of thirty-six months, from the end of the financial year succeeding the relevant tax year; or
  • (d) 70% of aggregate of tax and interest payable, as determined in sub-section (1) or (3), as the case may be, if such return is furnished after the expiry of thirty-six months, but before completion of forty-eight months, from the end of the financial year succeeding the relevant tax year.

267(6) ​

For the purposes of computation of “additional income-tax” under this section, tax shall include surcharge and cess, by whatever name called, on such tax.

267(7) ​

Irrespective of anything contained in section 424(2), for the purposes of sub-section (3), interest payable under section 424 shall be computed on an amount equal to the assessed tax where, “assessed tax” means the tax on the total income as declared in the return to be furnished under section 263(6),—

  • (a) after taking into account,— (i) the amount of relief or tax referred to in section 266(1), the credit for which has been claimed in the earlier return, if any; (ii) tax deducted or collected at source, as per the provisions of Chapter XIX-B, on any income which is subject to such deduction or collection and which is taken into account in computing such total income, which has not been included in the earlier return; (iii) any relief of tax or deduction of tax claimed under section 159(1) or 160 on account of tax paid in a country outside India on such income which has not been included in the earlier return; (iv) any relief of tax claimed under section 159(2) on account of tax paid in any specified territory outside India referred to in that section on such income which has not been included in the earlier return; (v) any tax credit claimed, to be set off as per section 206(13), which has not been claimed in the earlier return; and
  • (b) as increased by refund, if any, issued in respect of such earlier return.

267(8) ​

If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, by notification, issue guidelines removing the difficulty.

267(9) ​

No guidelines under sub-section (8) shall be issued after the expiration of two years from the 1st April, 2026.

267(10) ​

Every guideline issued by the Board under sub-section (8) shall be laid before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session aforesaid, both houses agree in making any modification in such guideline or both Houses agree that the guideline, should not be issued, the guideline shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that guideline.

267(11) ​

For the purposes of this section,—

  • (a) interest payable under section 423, for the purposes of sub-section (1), shall be computed on the amount of tax on the total income as declared in the return, under section 263(6), as per section 266(4);
  • (b) interest payable under section 425, for the purposes of sub-section (3), shall be computed after taking into account the total income furnished in the return under section 263(6) as the returned income;
  • (c) interest payable, for the purposes of sub-section (5), shall be the interest chargeable under any provision of this Act, on the income as per return furnished under section 263(6), as reduced by interest paid, as per the earlier return, if any.

267(12) ​

For the purposes of sub-section (11)(c), the interest paid in the earlier return shall be nil if such return is an updated return referred to in sub-section (1).

Explanation

Section Summary: ​

Section 267 of the Income Tax Act introduces provisions for tax on updated returns. It applies when an assessee (taxpayer) files an updated return under Section 263(6) after failing to file an original return or after filing an incorrect or incomplete return. The section outlines the tax, interest, and additional income-tax payable, along with the conditions and timelines for filing such updated returns.

This section is significant because it allows taxpayers to correct omissions or errors in their original returns but imposes additional costs (in the form of extra tax and interest) for doing so. It also ensures that taxpayers cannot indefinitely delay filing accurate returns without facing financial penalties.

Key Changes: ​

  1. Introduction of Updated Returns: This is a new concept allowing taxpayers to file updated returns after the original due date, subject to additional tax and interest.
  2. Additional Income-Tax: A new penalty-like tax is introduced, ranging from 25% to 70% of the tax and interest payable, depending on how late the updated return is filed.
  3. Timelines for Filing Updated Returns: Updated returns can be filed within specific timeframes (up to 48 months from the end of the relevant financial year), with increasing penalties for delays.
  4. Inclusion of Surcharge and Cess: The additional income-tax calculation includes surcharge and cess, increasing the overall tax liability.

Practical Implications: ​

  1. For Taxpayers:

    • Taxpayers who missed filing their original returns or made errors can now correct them by filing updated returns.
    • However, they must pay the original tax, interest, and an additional income-tax (ranging from 25% to 70%) depending on the delay.
    • This provision discourages late filings by imposing higher costs for delays.

  2. For Businesses:

    • Businesses with complex transactions or international operations may find this provision useful for correcting errors in tax filings, but the additional tax could increase compliance costs.

  3. For Compliance Processes:

    • Taxpayers must ensure that all payments (tax, interest, and additional income-tax) are made before filing the updated return.
    • Proof of payment must accompany the updated return.

Critical Concepts: ​

  1. Updated Return: A return filed under Section 263(6) after the original due date, allowing taxpayers to correct omissions or errors.
  2. Additional Income-Tax: A penalty-like tax imposed on updated returns, calculated as a percentage (25% to 70%) of the tax and interest payable, depending on the delay.
  3. Assessed Tax: The tax calculated on the total income declared in the updated return, after adjusting for reliefs, deductions, and credits.
  4. Interest Payable: Interest is calculated under Sections 423, 424, and 425 for delays in filing returns or paying advance tax.

Compliance Steps: ​

  1. Determine Eligibility:
    • Check if you are eligible to file an updated return under Section 263(6).
  2. Calculate Tax Liability:
    • Compute the tax, interest, and additional income-tax payable based on the updated return.
  3. Make Payments:
    • Pay the tax, interest, and additional income-tax before filing the updated return.
  4. File Updated Return:
    • Submit the updated return along with proof of payment.
  5. Maintain Documentation:
    • Keep records of all calculations, payments, and filings for future reference.

Examples: ​

  1. Scenario 1: Missed Filing Original Return:

    • Mr. A did not file his income tax return for FY 2022-23 by the due date. In December 2024 (within 24 months from the end of FY 2023-24), he decides to file an updated return. His tax liability is ₹1,00,000, and interest is ₹10,000.
    • Additional income-tax: 50% of (₹1,00,000 + ₹10,000) = ₹55,000.
    • Total payment: ₹1,00,000 (tax) + ₹10,000 (interest) + ₹55,000 (additional tax) = ₹1,65,000.
    • Mr. A must pay ₹1,65,000 and file the updated return with proof of payment.

  2. Scenario 2: Correcting Errors in Original Return:

    • Ms. B filed her original return for FY 2022-23 but later discovered she underreported income. In March 2026 (within 36 months from the end of FY 2023-24), she files an updated return. Her additional tax liability is ₹50,000, and interest is ₹5,000.
    • Additional income-tax: 60% of (₹50,000 + ₹5,000) = ₹33,000.
    • Total payment: ₹50,000 (tax) + ₹5,000 (interest) + ₹33,000 (additional tax) = ₹88,000.
    • Ms. B must pay ₹88,000 and file the updated return with proof of payment.

This section provides a structured way for taxpayers to correct their filings but imposes significant costs for delays, ensuring compliance while discouraging late submissions.