New Delhi, Feb. 24 -- The 2025 Budget has extended the window for filing updated income tax returns (ITRs) from two years to four.

So, after you file an ITR, you get four years from the end of the assessment year to include any additional income in the updated ITR that you have missed reporting in the original tax return.

Sounds like a good deal for voluntary compliance? It is, only until you realise it is no free lunch and comes with a 25-70% tax penalty.

The highest penal tax is 70% of the aggregate of tax due and interest when the updated ITR is filed in the fourth year. In the third year, the penal tax is 60%. Here's another catch - the cost of voluntary compliance by filing an updated return in the third or fourth year is much hig...