Missed reporting wrongful deductions? Do this now to avoid bigger penalties

The deadline for filing a revised income tax return (ITR) for FY 2024-25 is now over. In 2025, the income tax department extended the ITR filing deadline (non-audit purposes) twice: once to September 15 from July 31 before, due to various changes in the ITR forms, and then a final one-day extension to help taxpayers file before the deadline due to portal glitches.

However, the deadline to file a revised return to correct mistakes (if any) was the same, December 31. Now, even that deadline has passed. So, if you made any mistakes in your ITR, the only option you have is to file an updated return (ITR-U) to avoid further penalties.

If you claimed wrongful deductions or missed correcting them while filing your Income-tax Return (ITR) for FY 2024-25 (AY 2025-26), and haven’t received a refund till now, filing an ITR-U is the only correct way to move forward. Although the updated return will not make you eligible for any refund. Let’s understand this in detail.

What are wrongful deductions?

When a taxpayer tries to claim tax benefits that he/she isn’t eligible for, according to the conditions laid down under the Income-tax Act, 1961, they become wrongful deductions. These errors happen due to misreporting, incorrect documentation and other reasons.

For example, if you claim Section 80G deductions for donations made to unrecognised or ineligible entities, they’ll be considered wrongful. Another example is if you claimed deductions under sections such as 80C, 80D or 80E without actual eligible investments.

What can you do now?

In case you didn’t report wrongful deductions, you can file ITR-U by following these steps:

• Go to the e-filing portal
• Log in to the portal
• Choose Updated Return under Section 139(8A)
• Select the relevant form (ITR-1/ITR-2)
• Fill in the details
• State the reason for the updated return
• Calculate tax payable and additional liability
• Pay the dues
• Enter Challan details
• Submit the form

Remember to e-verify your updated return, or it will become invalid in 30 days.

Who can file an updated return?

ITR-U helps taxpayers fix any errors/omissions in their returns by voluntarily complying with the tax laws to avoid penalties or litigation.

Importantly, ITR-U can be filed even if a taxpayer missed filing their ITR in the first place. It can also be filed for these reasons:

• Misreported income
• Income reported under the wrong head
• Unabsorbed depreciation or tax credit needs to be reduced
• Tax liability calculated incorrectly

While ITR-U can be filed for many mistakes made during the original ITR filing, remember that it cannot be filed to claim/increase your refund, reduce tax liability or if there’s a NIL return or a loss return. This means you can correct your mistakes and declare additional income through ITR-U, but you cannot use it to decrease your tax liability.

Moreover, if tax authorities have already started prosecution proceedings, you can’t file an ITR-U for that particular assessment year.

Is there a penalty for filing ITR-U?

Yes, as per Income Tax rules, you will have to pay penalties on filing ITR-U. The penalty will depend on when you file it:

Deadline for filing ITR-U

The deadline for filing an Updated Income Tax Return (ITR-U) is 48 months (four years) from the end of the relevant Assessment Year (AY). This was previously 24 months. For the assessment year 2025-26, the deadline to file ITR-U is March 31, 2030.

What if you don’t file an ITR-U?

If you miss filing ITR-U, it may lead to:

• Scrutiny assessments
• Penalty proceedings with higher liabilities
• Prosecution (in extreme cases)
• Interest on unpaid tax liability

If you missed filing your return and also missed the revised return filing deadline, this is your chance to file your updated return to avoid further trouble.

NUDGE

The Central Board of Direct Taxes recently noted that it has identified many cases where bogus donations have been shown to Registered Unrecognised Political Parties (RUPPs), and many other instances of ineligible deductions or exemptions have been noted. Further, incorrect PANs or invalid PANs of donees have been quoted, the CBDT said.

In response to this, the CBDT notified identified taxpayers under the Nonintrusive Usage of Data to Guide and Enable (NUDGE) campaign to correct the errors before December 31, 2025. Now that the deadline has passed, taxpayers can still file an ITR-U to comply with the laws voluntarily.

“It is clarified that taxpayers who do not avail of this opportunity (to file the revised return) may still file an updated return from 1st January 2026, as permitted under law, subject to payment of additional tax liability,” the CBDT said in a release on December 23.