December 31 deadline for taxpayers: Last chance to file belated or revised ITR before costs rise

December 31, 2025, marks a decisive cut-off for Indian taxpayers who are yet to regularise their income tax filings for the current assessment year. It is the final day to file both belated and revised income tax returns for Assessment Year 2025–26. Once this window shuts, taxpayers lose access to these relatively flexible options and must rely on the far more expensive “updated return” route.

With the deadline approaching, the Income Tax Department has stepped up communication, sending SMS and email alerts to taxpayers whose refunds have been withheld due to mismatches in their filings. In most cases, the department has advised affected individuals to file a revised return by December 31 to correct discrepancies and unblock refunds.

The urgency has been heightened by the tax department’s recent scrutiny of cases involving excess refund claims, inconsistencies between Form 16 and Annual Information Statements (AIS), unreported political donations, and omissions related to foreign assets. For many taxpayers, confusion over the available filing options has compounded the stress.

Why December 31 matters

Under the Income Tax Act, taxpayers who miss the original filing deadline still have limited opportunities to correct or complete their returns. December 31 is the final day to use two of these options—belated and revised returns. From January 1, 2026, any correction or disclosure must be routed through an updated return under Section 139(8A), which carries additional tax costs and fewer benefits.

Tax professionals warn that misunderstanding these options at the deadline stage can turn a manageable error into an expensive compliance problem.

Revised return: Fixing mistakes without penalty

A revised return is filed when a taxpayer has already submitted an original return but later discovers an error or omission. This could involve incorrect income details, missed deductions, or mismatches flagged by the tax department.

Importantly, a revised return replaces the original return entirely. Taxpayers can revise their return multiple times, but only until December 31 or until the assessment is completed—whichever is earlier.

Penalty and interest: Filing a revised return does not attract a penalty, provided the mistake was not deliberate. Interest is payable only if additional tax becomes due.

Losses and refunds: If the original return was filed on time, taxpayers can still correct and carry forward eligible losses. Refunds can also be claimed or adjusted, subject to verification.

Belated return: Last chance for non-filers

A belated return applies to taxpayers who failed to file their income tax return by the original due date. December 31 is the final opportunity to file such returns for the assessment year.

Penalty and interest: Late filing fees can go up to Rs 5,000. For taxpayers with total income below Rs 5 lakh, the fee is capped at Rs 1,000. Interest is charged on unpaid taxes, and in some cases, the option to choose a preferred tax regime may be lost.

Losses and refunds: While losses can be set off against income in the same year, most losses, such as business or capital losses, cannot be carried forward. Refunds can still be claimed, though processing may take longer.

Updated return: A costly fallback

From January 1, 2026, taxpayers must rely on the updated return (ITR-U) to file or correct returns. This option remains available for up to 48 months from the end of the assessment year, but it comes with a steep price.

Penalty and interest: Additional tax of 25% to 70% is levied, depending on how late the updated return is filed. Only one updated return is allowed per year, and it must be verified.

Losses and refunds: Updated returns cannot be used to create or increase losses, nor can they be used to claim refunds.

The Income Tax Department has repeatedly cautioned taxpayers not to treat the updated return as a substitute for timely compliance. For those aiming to minimise penalties, protect refunds, and avoid unnecessary tax outgo, December 31 remains a deadline that cannot be ignored.