India Budget 2025: Time Limit Extended for Updated Tax Returns

India Budget 2025: Time Limit Extended for Updated Tax Returns

India has introduced a significant amendment in its Budget 2025 by extending the time limit for filing an updated income tax return from 24 months to 48 months.

This move is aimed at encouraging voluntary compliance and providing taxpayers with a longer window to rectify any errors or omissions in their tax filings.

According to expert commentary on India’s Budget 2025, PwC has stated that the extension of the time limit for filing updated tax returns will allow taxpayers to correct their returns without facing prolonged tax litigation. The updated timeline is applicable from the end of the relevant Assessment Year (AY), and the additional tax outflow is structured as follows:

Time PeriodAdditional Tax
Upto 12 months25%
After 12 months and upto 24 months50%
After 24 months and upto 36 months60%
After 36 months and upto 48 months70%

In addition to the extended tax return filing window, India’s Budget 2025 introduces further amendments to tax policies. Effective from 1 April 2025, it is proposed that no fresh lease of eight years will be granted for accumulated losses in the case of mergers or amalgamations. Instead, such losses will only be allowable for the remaining unexpired period. This measure is expected to impact the cost-benefit analysis of amalgamations for industrial undertakings with significant accumulated losses.

Furthermore, India is set to expand the definition of Virtual Digital Assets (VDAs) to encompass any crypto-asset that represents digital value and operates on a cryptographically secured distributed ledger or a similar technology for transaction validation and security. This change is likely aimed at aligning India’s regulatory framework with the OECD’s Crypto-Asset Reporting Framework.

Key Takeaways:

The extended time limit for filing updated tax returns in India will encourage taxpayers to voluntarily correct their filings, reducing tax-related disputes.

The restriction on the set-off period for accumulated losses in mergers may influence the strategic financial planning of businesses considering amalgamations.

The expanded definition of VDAs aligns India’s crypto regulations with global standards, enhancing oversight of digital assets.

India’s Budget 2025 reflects a balanced approach to strengthening tax compliance, enhancing regulatory clarity, and fostering a more structured financial ecosystem.