Small Taxpayers Not Exempted From Filing ITR Under New Tax Bill 2025, Say Chartered Accountants
Small taxpayers may still be required to file income tax returns (ITR) to claim refunds, even if their income falls 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 led by BJP MP Baijayant Panda.
One major amendment clarifies the eligibility for refunds for late return filers—taxpayers submitting belated or revised returns after the due date will continue to be entitled to refunds on excess taxes deducted during the financial year.
However, a key relief proposal for small taxpayers did not find a place in the final Bill—removing the obligation to file returns solely for claiming tax refunds. “The notion, as stated in the Select Committee Report, that small taxpayers might no longer be required to file returns just to claim refunds is incorrect. Section 433 of the new Bill clearly states that refunds can only be claimed by filing a return of income, with no alternate mode permitted,” Mayank Mohanka, Founder-Director of TaxAaram.com, told Moneycontrol.com.
Many small taxpayers, including senior citizens, are forced to file returns purely to claim refunds on excess TDS, even when their income is below the basic exemption threshold. The parliamentary committee had recommended that the law should not compel such filings merely to avoid penalties.
“The mandatory requirement to file returns solely for claiming refunds could unintentionally expose small taxpayers, whose income is below taxable limits but who have had tax deducted at source, to prosecution. The law should not compel return filing in such cases just to avoid penal consequences for non-filing,” the committee report noted.
Section 433 of the Bill explicitly states: “Every claim for refund under this part shall be made by furnishing a return as per section 263.” This means that anyone seeking a refund must file a return for the relevant financial year.
Anita Basrur, Partner at Sudit K. Parekh & Co. LLP, clarified, “Small taxpayers, including senior citizens, must file returns solely to claim refunds for excess TDS, even if their income is below the basic exemption limit.”
It has also been confirmed that refunds can be claimed even through belated returns. Therefore, the proposed law maintains the existing requirement of filing an income tax return and undergoing processing of the return before refunds are granted, irrespective of the taxpayer’s income level, Basrur added.
Akhil Chandna, Partner at Grant Thornton Bharat, said, “The belief stemming from the Select Committee Report that small taxpayers may be exempt from filing returns solely to claim refunds is not accurate. Section 433 of the New Income Tax Bill specifies that refunds can only be claimed by filing a return of income, without any alternative procedure. While the intention to simplify processes is welcome, further simplification could have considerably eased compliance for low-income earners.”
