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Small taxpayers may still need to file returns to claim refunds, even when their income is below the basic exemption limit
Small taxpayers may still need to file returns to claim refunds, even when their income is below the basic exemption limit
The new Income Tax Bill 2025, has been passed by the Lok Sabha after incorporating recommendations from the 31-member parliamentary panel headed by BJP MP Baijayant Panda.
One major change is the removal of ambiguity regarding whether late-return filers are eligible for refunds on excess taxes deducted during a financial year. In simple terms, taxpayers filing belated or revised returns beyond the due date will still be entitled to refunds.
However, a significant relief proposal for small taxpayers has not made it into the final Bill—removing the requirement to file returns solely to claim tax refunds. “The perception as reflected in the Select Committee Report, that small taxpayers may no longer be required to file their returns just to claim their refunds does not hold good, as section 433 of the new Bill still mandates that refund can be claimed only via a return of income, and no other means or mode,” Moneycontrol.com quoted Mayank Mohanka, Founder-Director, TaxAaram.com, as saying.
Many small taxpayers, including senior citizens, are compelled to file returns purely to claim a refund on excess TDS, even if their income is below the basic exemption threshold. The parliamentary committee had suggested that the law should not force such filings merely to avoid penalties.
“The current mandatory requirement solely to claim a refund could inadvertently lead to prosecution, particularly for small taxpayers whose income falls below the taxable threshold but from whom tax has been deducted at source. In such scenarios, the law should not compel a return merely to avoid penal provisions for non-filing,” the report noted.
Section 433 of the Bill still states that “every claim for refund under this part shall be made by furnishing a return as per section 263.” This section requires a person intending to claim a refund to file a return for the relevant financial year.
Anita Basrur, Partner, Sudit K. Parekh & Co. LLP, explained: “Small taxpayers, including senior citizens, must file returns solely to claim a refund for excess taxes deducted at source (TDS), even if their income is below the basic exemption threshold.”
Doubts have been further cleared that to claim a refund, the return could be a belated return as well. Thus, the proposed law continues the current requirement of filing an income tax return and going through the processing of the return for granting a refund, regardless of the taxpayer’s income level, Basrur added.
Akhil Chandna, Partner, Grant Thornton Bharat, stated: “The perception arising from the Select Committee Report that small taxpayers may be exempted from filing returns solely to claim a refund does not hold good. Section 433 of the New Income Tax Bill stipulates that refunds can only be claimed through the filing of a return of income, with no provision for any alternative process. While the intent to streamline processes is appreciated, further simplification may have significantly eased the compliance for low-income earners.”
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
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