Section 267 · Returns
Section 267 of the Income-tax Act, 2025 — Tax on Updated Return (ITR-U)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XV
📜 What the law says — Section 267, Income-tax Act 2025
267. (1) Where no return of income under section 263(1) or (4) has been furnished
by an assessee and, after taking into account the amounts referred to in
sub-section (2), tax is payable on the basis of return to be furnished by such assessee
under section 263(6), then—
(a) the assessee shall be liable to pay such tax together with interest and fee
payable under any of the provisions of this Act for any delay in furnishing
the return or any default or delay in payment of advance tax;
(b) such tax, interest and fee shall be payable along with the payment of
additional income-tax computed as per sub-section (5), before furnishing
the return; and
(c) the return shall be accompanied by proof of payment of such tax, addi-
tional income-tax, interest and fee.
(2) The amounts referred to in sub-section (1) shall be,—
(a) the amount of tax, if any, already paid as advance tax;
(b) any tax deducted or collected at source;
50. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause (e) read
as under :
“(e) any tax credit claimed to be set off as per the provisions of section 206(1)(m) to (p)
and 206(2)(e) to (h).”
(c) any relief of tax claimed under section 157;
(d) any relief of tax or deduction of tax claimed under section 159(1) or
160on account of tax paid in a country outside India;
(e) any relief of tax claimed under section 159(2)on account of tax paid in
any specified territory outside India referred to in that section; and
51
[(f) any tax credit claimed to be set off as per the provisions of section 206(2)
(e) to (h) and 206(3) and (4).]
(3) Where, return of income under section 263(1) or (4) or (5) (referred to as earlier
return) has been furnished by an assessee and, after taking into account the amounts
referred to in sub-section (4) [as increased by the amount of refund, if any, issued in
respect of such earlier return], tax is payable on the basis of return to be furnished
by such assessee under section 263(6)then—
(a) the assessee shall be liable to pay such tax together with interest payable
under any provision of this Act for any default or delay in payment of
advance tax;
(b) such tax, interest and fee shall be payable along with the payment o
In plain language
What Section 267 is about
Section 267 of the Income-tax Act, 2025 lays down how much tax you must pay when you file an "updated return" (ITR-U). The right to file the updated return itself comes from Section 263(6) of the 2025 Act; Section 267 is the companion provision that fixes the money side — the tax, interest, late-fee and, most importantly, the graded additional income-tax that must be paid before the return is furnished. It is the 2025 Act's re-enactment of the old Section 140B of the Income-tax Act, 1961.
The idea is simple: the law gives you a long second chance to voluntarily come clean and declare income you missed — but the longer you wait, the more extra tax you pay on top of your normal dues. It is a "pay-to-regularise" mechanism, not a free correction window.
Who it applies to
- Any person — individual, HUF, firm, LLP or company — who wants to file an updated return under Section 263(6), whether or not they filed an original, belated or revised return earlier.
- Those who missed reporting some income, wrongly claimed a deduction/loss, or applied a wrong tax rate, and now wish to correct it voluntarily.
- It does not apply where the updated return would reduce tax, show/increase a loss, increase a refund, or where certain proceedings (search, survey, prosecution) are pending — those bars sit in Section 263 and disqualify the filing altogether.
How the tax is computed — step by step
- Step 1 – Compute total income and normal tax on the updated return, including interest under the interest provisions and any late-filing fee.
- Step 2 – Give credit for advance tax, TDS/TCS, and reliefs already available, plus tax paid on any earlier return, and reduce any refund already issued. This gives the "aggregate of tax and interest payable".
- Step 3 – Add the additional income-tax under sub-section (5) at 25%, 50%, 60% or 70% of that aggregate, depending on how late the updated return is filed.
- Step 4 – Pay everything first. Tax + interest + fee + additional tax must be paid as self-assessment tax before filing, and proof attached; otherwise the return is treated as defective.
Important base rule: the additional tax is charged on the aggregate of tax and interest, and under sub-section (6) the word "tax" here includes surcharge and cess. So the 25%/50%/60%/70% bites on a fairly wide base.
The four time-slabs and rates
All timelines run from the end of the financial year that immediately follows the relevant tax year. The updated return can be filed up to 48 months (4 years) from that point — a big extension from the earlier 24-month window. The rate rises with delay (see table below).
How it interacts with related sections
- Section 263 — grants the right to file the updated return and sets eligibility bars; Section 267 sets the cost.
- Interest provisions — normal interest for late filing and shortfall in advance tax is payable in addition to the additional tax; the additional tax is over and above interest, not a substitute.
- Self-assessment tax provisions — the combined amount is deposited as self-assessment tax before filing.
Practical implications for taxpayers
- File early if you must file. The jump from 25% to 50% at the 12-month mark is the single biggest cliff — a full doubling of the additional tax. Do not drift past a year-end boundary.
- The extra tax is not deductible and cannot be recovered as a refund — treat it as the price of voluntary compliance.
- No return with a loss or higher refund can be filed as an updated return, so this route is only for paying more tax.
- Because surcharge and cess sit inside the base, high-income taxpayers effectively pay additional tax on their surcharge too — the real cost can be meaningful.
💡 Example
Worked example 1 — filing within 12 months. Rahul, a salaried professional, realises he forgot to report ₹4,00,000 of freelance income for tax year 2026-27. Extra normal tax on this comes to ₹1,20,000 and interest for delay is ₹18,000. His "aggregate of tax and interest" is ₹1,38,000. If he files the updated return within 12 months of the end of FY 2027-28, the additional tax is 25% of ₹1,38,000 = ₹34,500. Total payable before filing: ₹1,38,000 + ₹34,500 = ₹1,72,500.
Worked example 2 — filing after 24 months. Suppose Rahul procrastinates and files only after 24 but before 36 months. The 60% slab now applies: additional tax = 60% of ₹1,38,000 = ₹82,800, so total = ₹2,20,800. The same disclosure costs him ₹48,300 more purely because of the delay — the plainest possible argument for filing sooner.
A short story. Meera, who runs a boutique, received a bank interest entry she never showed. A friend warned her the department now cross-matches AIS data. Rather than wait for a notice, she used the updated-return route under Section 263 and paid her dues with 25% additional tax under Section 267. It stung, but it was far cheaper and calmer than facing a scrutiny assessment with penalties — "peace of mind at 25%," as she put it.
| Updated return filed within | Time from end of FY succeeding the tax year | Additional income-tax (on aggregate of tax + interest, incl. surcharge & cess) |
|---|
| Slab 1 | After due date, up to 12 months | 25% |
| Slab 2 | After 12 months, up to 24 months | 50% |
| Slab 3 | After 24 months, up to 36 months | 60% |
| Slab 4 | After 36 months, up to 48 months | 70% |
Related sections
Section 263 — Return of income (and the right to file an updated return) Section 140B (Act, 1961) — Tax on updated return (old equivalent) Section 139(8A) (Act, 1961) — Updated return provision Section 268 — Interest for defaults in furnishing return Section 270 — Self-assessment tax Section 269 — Fee for default in furnishing return of income
Frequently asked questions
What is the maximum period to file an updated return under Section 267?
An updated return can be filed up to 48 months (4 years) from the end of the financial year that immediately follows the relevant tax year. Beyond this, the updated-return route is closed.
How much extra tax do I pay on an updated return?
Additional income-tax of 25%, 50%, 60% or 70% of the aggregate of tax and interest is payable, depending on whether you file within 12, 24, 36 or 48 months respectively. This is over and above normal tax, interest and any late fee.
Is the additional tax charged on my income or on my tax?
It is charged on the aggregate of tax and interest payable — not directly on income. Under sub-section (6), that tax figure also includes surcharge and cess, which widens the base.
Can I file an updated return to claim a refund or a bigger loss?
No. Section 263 bars an updated return that reduces total tax, shows or increases a loss, or increases a refund. Section 267 only applies where you are paying additional tax.
Do I get credit for TDS, advance tax and taxes already paid?
Yes. Credit is given for advance tax, TDS/TCS, reliefs and any tax already paid on an earlier return, and any refund already issued is adjusted, before computing the additional tax.
What happens if I file the updated return without paying the tax first?
The return will be treated as defective. Section 267 requires the full amount — tax, interest, fee and additional tax — to be paid as self-assessment tax before the updated return is furnished, with proof of payment.
Which old provision does Section 267 replace?
It corresponds to Section 140B of the Income-tax Act, 1961 (read with Section 139(8A)), carried forward into the 2025 Act with the extended 48-month window and the four-slab 25/50/60/70% rate structure.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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