If trust has been Nirmala Sitharaman’s byword for taxpayers so far, she took it further this year to improve ‘ease’ of filing and updating returns, and encouraging voluntary compliance to cut down on litigation. Sitharaman said the new Income Tax Act, 2025, which comes into force from April 1, is revenue-neutral, with no changes to income tax rates or slabs, but reducing the number of sections by nearly half and removing layers of interpretational ambiguity. One of the most significant changes is the introduction of a single ‘tax year’, replacing the confusing distinction between assessment year and previous year. The redesigned income tax return forms will be notified shortly, with the govt promising simpler language and layouts that allow ordinary taxpayers to comply without professional assistance. The FM said the time limit for filing a revised tax return was being extended from nine months to 12 months after the end of the tax year, leaving enough room to fix mistakes without staring at a penalty. Taxpayers can now update their returns after reassessment proceedings have been initiated at a cost. An additional 10% tax rate will apply over and above the rate applicable for the relevant year. Such returns can also be filed to reduce earlier claimed losses.

More Time To Revise, Fix Mistakes

CA Ketan Vajani said, “The taxpayer can now take shelter under updated return and avoid penalties with 10% extra cost. An amendment is proposed with effect from assessment year 2026-27 and the benefit can be availed of even in the current financial year.” Gautam Nayak, tax partner at CNK & Associates added, “Instead of paying 25%, the taxpayer would have to pay 35%. However, this would enable closure of the matter without resorting to a drawnout and time-consuming reassessment and consequential penalty process. Of course, such updated return cannot be filed in prohibited cases, such as those where information is available under the Black Money Act, Prevention of Money-Laundering Act etc.” Currently, an additional Rs 8 lakh, she can now do so. In another move to cut down on disputes, the FM has proposed integration of assessment and penalty proceedings into a single, common order. Reducing paperwork and the prospect of physical interactions with tax officials, applications for lower/nil TDS certificates can be filed electronically. Tax starting at 25%, going up to 70%, of the differential tax and interest is payable depending on the delay in filing the updated return. Further, filing an updated return is now possible to reduce losses claimed earlier. For instance, if the original return had loss of Rs 10 lakh and the taxpayer wants to file an updated return with loss of Rs 8 lakh, she can now do so. In another move to cut down on disputes, the FM has proposed integration of assessment and penalty proceedings into a single, common order. Reducing paperwork and the prospect of physical interactions with tax officials, applications for lower/nil TDS certificates can be filed electronically.