1. Introduction (Section 263)

Section 263 of the Income Tax Act, 2025 mandates the furnishing of a return of income (ITR) by specified persons within prescribed timelines. The provision ensures proper disclosure of income, assets, and financial transactions, forming the foundation of the tax assessment system.

2. Applicability of Filing Return of Income (Section 263(1))

2.1 Mandatory Filing Requirement (Section 263(1)(a))

The following persons are required to furnish a return of income:

• • Company
  • Firm
  • Individuals / other persons whose total income exceeds the basic exemption limit
  • Specified entities whose income (before exemptions) exceeds the threshold
  • Universities, colleges, and institutions referred under the Act
  • Business trusts and investment funds
  • Persons incurring losses under “Business or Profession” or “Capital Gains” and intending to carry forward such losses
  • Resident persons (excluding not ordinarily resident) holding:
    • Foreign assets or financial interests, or
    • Signing authority in foreign accounts, or
    • Beneficiary interest in foreign assets
  • Other prescribed persons meeting specified conditions

2.2 Mandatory Filing Regardless of Income (Section 263(1)(b))

The following persons must file returns irrespective of income or loss:

• • Companies
  • Firms
  • Certain institutions
  • Business trusts
  • Investment funds
  • Specified residents holding foreign assets

3. Due Dates for Filing Return (Section 263(1)(c))

4. Belated Return (Section 263(4))

• A person who fails to file within the due date may file a belated return
• Time limit:
  • Within 9 months from the end of the relevant tax year, or
  • Before completion of assessment, whichever is earlier

5. Revised Return (Section 263(5))

• A return can be revised if any omission or incorrect statement is discovered
• Time limit:
  • Within 9 months from the end of the relevant tax year, or
  • Before completion of assessment

6. Updated Return (Section 263(6))

6.1 Time Limit

• • Can be filed within 48 months from the end of the financial year succeeding the relevant tax year

6.2 Conditions for Filing

Updated return can be filed:

• • Even if no return was originally filed
  • Where loss was declared earlier but updated return reflects income

6.3 Restrictions

Updated return is not permitted where it:

• • Declares a loss
  • Reduces tax liability
  • Increases refund
  • Is filed after assessment proceedings are initiated or completed
  • Is filed after receipt of information from authorities regarding non-compliance
  • Is filed after initiation of prosecution or search/survey proceedings
  • Is filed by notified restricted persons

7. Impact on Subsequent Years (Section 263(6)(e))

If updated return affects:

• • Carried forward losses
  • Unabsorbed depreciation
  • Tax credits

Then updated returns must also be filed for subsequent affected years.

8. Defective Return (Section 263(7))

• If return is defective, the Assessing Officer shall intimate the defect
• Assessee must rectify within 15 days (or extended period)
• Failure to rectify → return treated as invalid
• Delay may be condoned if rectified before assessment