ITR-U: December 2025 was a tough month for a lot of taxpayers. The Income Tax Department sent out reminders to thousands of people, urging them to double-check their FY25 returns and fix any mistakes by December 31st. That deadline has now passed. So, what should you do if there are still errors or if some income is unreported? The solution is ITR-U, or updated returns.
What is ITR-U?
The updated income tax return, or ITR-U, offers taxpayers a second chance. It lets individuals report any missed income within four years after the assessment year ends. But keep in mind, this service isn’t free; you’ll need to pay extra taxes, interest, and penalties. In simple terms, you should only file ITR-U if fixing the mistake means you’ll owe more tax to the government, not less.
Who can file ITR-U?
Taxpayers who have already submitted their original, belated, or revised returns and later find out they’ve overlooked some income can file ITR-U. This option is also open to those who didn’t file an ITR at all and now wish to correct their mistake, as long as additional tax is owed.
What can be corrected in ITR-U?
You can use ITR-U to fix mistakes like underreporting income, misclassifying income, or using the wrong tax rate. However, it can’t be used to claim deductions or exemptions, request refunds, offset losses, or make any entries that would lower your tax. Even if the tax amount stays the same, ITR-U won’t be permitted.
Bhavana Kakkar, CA and founder of Kakkar & Co., provides an example: “Imagine you forgot to report capital gains and want to include them later. If the tax still goes up after accounting for the loss, you can file ITR-U. But if the loss completely cancels out the gain and the tax doesn’t increase, then this option is off the table.”
ITR-U filing cost
In ITR-U, you must pay tax, interest, and a penalty . Interest is charged at 1% per month (Section 234B). The later you file ITR-U, the higher the penalty. Penalties can be 25% in the first year, 50% in the second year, 60% in the third year, and up to 70% in the fourth year. Additionally, you must pay 1% monthly interest on the tax. For example, if FY25 results in Rs 20,000 in tax and Rs 2,000 in interest, the base would be Rs 22,000. Filing in year 1 would incur a 25% penalty, or Rs 5,500. The total outgo would be Rs 27,500.
Last date for filing ITR-U
The last date for filing updated returns for FY2020–21 is March 31, 2026. Especially if you have missed out on foreign income, you must file ITR-U, otherwise the penalty can go up to Rs 10 lakh.