How to compute Tax on Updated Return under section 140B?

How to compute Tax on Updated Return under section 140B?

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How to compute Tax on Updated Return under section 140B?

Case 1: Where No Return of Income under section 139(1) or (4) has been furnished by an assessee:

The amount of tax payable is computed on the basis of Updated Return to be furnished by such assessee under section 139(8A), after taking into account,—
(i) the amount of tax, if any, already paid as advance tax;
(ii) any tax deducted or collected at source (TDS/TCS);
(iii) relief under section 89 (Salary Arrears);
(iv) any relief under section 90 (Double Taxation Relief) or section 91 (Countries with which no agreement exists) on account of tax paid in a country outside India;
(v) any relief under section 90A (Double Taxation Relief) on account of tax paid in any specified territory outside India referred to in that section; and
(vi) any tax credit claimed to be set off in accordance with the provisions of section 115JAA (MAT Credit) or section 115JD (Tax credit for alternate minimum tax).

The assessee shall be liable to pay Tax + Interest + Fee payable + Additional income-tax

Calculation of Interest:

  • Interest payable under section 234A shall be computed on the amount of the tax on the total income as declared in the Updated return under sub-section (8A) of section 139.
  • Interest payable under section 234C, shall be computed after taking into account the income furnished in the return under sub-section (8A) of section 139 as the returned income.

Case 2: Where Return of Income under section 139(1) or (4) or (5) [Earlier Return] has been furnished by an assessee:

The amount of tax payable is computed on the basis of Updated Return to be furnished by such assessee under section 139(8A), after taking into account,—

(i) the amount of relief or Self-assessment tax referred to in section 140A(1), the credit for which has
been taken in the earlier return;
(ii) tax deducted or collected at source (TDS/TCS), 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;
(iii) relief under section 90 (Double Taxation Relief) or section 91 (Countries with which no agreement exists) on account of tax paid in a country outside India on such income which has not been included in the earlier return;
(iv) relief under section 90A (Double Taxation Relief) 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 in accordance with the provisions of section 115JAA (MAT Credit) or section 115JD (Tax credit for alternate minimum tax), which has not been claimed in the earlier return;

Important Point: Tax payable in Updated Return will be increased by the amount of refund, if any, issued in respect of such earlier return.

The assessee shall be liable to pay Tax + Interest + Fee payable + Additional income tax – Interest already paid in the earlier return.

Calculation of interest payable under section 234B

Notwithstanding anything contained in Explanation 1 to section 234B, in the cases where an earlier return has been furnished, interest payable under section 234B shall be computed on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid falls short of the assessed tax, where, “assessed tax” means the tax on the total income as declared in the return to be furnished under sub-section (8A) of section 139,

(a) after taking into account,—
(i) the amount of relief or Self-assessment tax referred to in section 140A(1), the credit for which has
been taken in the earlier return;
(ii) tax deducted or collected at source (TDS/TCS), 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;
(iii) relief under section 90 (Double Taxation Relief) or section 91 (Countries with which no agreement exists) on account of tax paid in a country outside India on such income which has not been included in the earlier return;
(iv) relief under section 90A (Double Taxation Relief) 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 in accordance with the provisions of section 115JAA (MAT Credit) or section 115JD (Tax credit for alternate minimum tax), which has not been claimed in the earlier return;

Important Point: Interest amount shall be calculated on Tax payable in Updated Return, which will be increased by the amount of refund, if any, issued in respect of such earlier return.


Provisions of the Additional Income-tax

Additional Income-tax payable at the time of furnishing the Updated return under sub-section (8A) of section 139 shall be equal to,––

Updated Return FiledAdditional Income-tax
Within 12 months from the end of the relevant
assessment year
25% of the aggregate tax and interest payable
After 12 months but before completion of the period of 24 months from the end of the relevant assessment year.50% of the aggregate tax and interest payable

Important Point:

  • For the purposes of computation of “additional income-tax”, tax shall include surcharge and cess.
  • For the computation of additional tax, the interest payable shall be interest chargeable under any provision of the Income-tax Act, on the income as per return furnished under sub-section (8A) of section 139, as reduced by interest paid in the earlier return, if any.
    However, the interest paid in the earlier return shall be considered to be nil if no earlier return has been furnished.

Also Read: What is the updated return under section 139(8A) and its conditions?

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CA Gaganmeet Singh