'File a form, skip the ITR?': Govt could simplify TDS refunds for low-income earners

Indians earning below the tax threshold may soon be able to claim TDS refunds without filing a full income tax return, thanks to a key recommendation from the Select Committee on the Income-Tax Bill, 2025.

The proposed change would allow individuals—whose income is below the taxable limit but who have had tax deducted at source (TDS)—to submit a simplified form instead of a full income-tax return (ITR) to claim their refund.

According to a report by Hindustan Times, which quoted senior government officials involved in drafting the legislation, the panel’s recommendation aims to eliminate an “unfair burden” on small taxpayers. Business Today could not independently verify the claims.

“The panel felt that the current requirement to file a return just to claim a refund places an unfair burden on small taxpayers,” one official told HT. Often, these individuals face automatic TDS deductions—on interest income or salaries—because they missed filing the required declarations in time, despite not owing any tax.

The government has reportedly accepted the committee’s recommendation and is expected to include it as an amendment to the Income-Tax Bill, 2025. The proposed system would tie the new refund form to Form 26AS, which consolidates all TDS entries.

Currently, Section 263 of the draft bill mandates a return for refund claims, even for individuals below the tax limit. If accepted, the amendment would remove this requirement.

The issue is common among retirees and low-income earners with bank deposits or exempt salary structures. For instance, a salaried person earning ₹12.75 lakh annually may legally owe zero tax under the new regime, but still face deductions unless proper paperwork is filed.

The Select Committee’s comprehensive report includes 566 observations and 285 formal recommendations. Other key updates include more time for non-resident liaison offices to file statements, a reaffirmation of audit rights for chartered accountants, and expanded digital access for tax officials—especially related to crypto assets.

The new Income-Tax law is expected to take effect from April 1, 2026.