New Delhi, March 30, 2025 – As the clock ticks down to the end of the fiscal year, Indian taxpayers are racing against time to file their updated Income Tax Returns (ITR-U) before the critical deadline of March 31, 2025. With just one day remaining, the Income Tax Department has intensified its efforts to remind individuals and entities of the opportunity to correct errors or report previously undisclosed income for the financial years 2021-22 (Assessment Year 2022-23) and 2022-23 (Assessment Year 2023-24). However, this window comes with a catch: a hefty additional tax penalty that escalates after tomorrow.
Introduced under the Finance Act of 2022, the updated ITR filing provision allows taxpayers a two-year grace period from the end of the relevant assessment year to rectify mistakes or omissions in their original returns. For FY 2021-22 and FY 2022-23, this deadline expires on March 31, 2025. Filing an updated ITR by this date incurs a 25% additional tax plus interest on the undisclosed income. Miss this cutoff, and the penalty jumps to 50%, a steep price that has prompted a last-minute rush among taxpayers.
The Income Tax Department has been proactive in spreading awareness, leveraging social media platforms like X to urge compliance. A recent post emphasized, “Filing ITR-U now = 25% additional tax + interest,” highlighting the cost-benefit of acting swiftly. Tax experts echo this sentiment, advising taxpayers to seize the opportunity to avoid higher penalties and potential legal scrutiny. “This is a chance to come clean voluntarily,” said Vishwas Panijar, a partner at Nangia Andersen LLP. “After March 31, the stakes get higher, and the department’s focus on non-filers sharpens.”
Recent data underscores the scale of this compliance drive. Over 90 lakh updated ITRs have been filed for various assessment years as of early 2025, according to a statement made by the government in Parliament last week. For the current assessment year (2024-25), approximately 4.64 lakh updated ITRs were filed by February 28, generating taxes worth Rs 431.20 crore. This surge reflects both increased awareness and the department’s robust data-matching efforts, which cross-reference income details from sources like the Annual Information Statement (AIS), TDS/TCS records, and financial transaction statements.
The spotlight on ITR compliance has intensified following recent amendments aimed at curbing discrepancies. Starting next year, the Income Tax Department plans to compare current ITRs with previous filings to flag irregularities, a move designed to streamline processing and reduce the issuance of tax notices. Experts suggest this will encourage taxpayers to maintain consistency in their declarations, with one tax professional noting, “It’s about resolving errors upfront rather than dealing with audits later.”
For high-income earners, the stakes are even higher. Latest figures show that over 4.68 lakh taxpayers reported income exceeding Rs 1 crore for FY 2024-25 by February 28, a 43% jump from the previous year. This growth, attributed to booming sectors like technology and real estate, has bolstered overall ITR filings, which crossed 9.11 crore for the same period—a 6.8% increase year-on-year. Meanwhile, the department has identified non-filers with taxable income, issuing notices under Section 148A to individuals from as far back as AY 2019-20. Sources indicate that data from import-export records and high-value transactions has fueled this crackdown.
As taxpayers prepare for the upcoming ITR filing season for AY 2025-26, set to begin on April 1, 2025, the department has expanded its e-Pay tax services, adding banks like IDFC First Bank and Tamilnad Mercantile Bank to a list of 30 institutions. This move aims to ease payment processes amid expectations of another record-breaking filing year. The Budget 2025 announcement of a zero-tax threshold up to Rs 12 lakh under the new regime has also sparked interest, though experts clarify that ITR filing remains mandatory for those claiming rebates under Section 87A.
With the March 31 deadline looming, taxpayers face a critical decision: file now and mitigate costs or risk steeper penalties and scrutiny. As one chartered accountant put it, “Tomorrow isn’t just the end of the fiscal year—it’s the line between compliance and consequence.”
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