Income Tax Bill 2025 lets you claim late refunds but one old rule will still cost you

The new Income Tax Bill, 2025, passed by the Lok Sabha, offers relief for late filers but leaves small taxpayers with one old headache: filing returns just to get their own money back.

Incorporating key recommendations from a 31-member parliamentary panel led by BJP MP Baijayant Panda, the bill removes ambiguity over refunds for belated or revised returns. Taxpayers filing after the due date will still be entitled to claim refunds for excess taxes deducted during the year.

“This closes a gap that worried many late filers,” tax experts said. “But another much-needed fix for small taxpayers didn’t make it.”

That fix — allowing refunds without mandatory return filing — was recommended by the panel but dropped from the final law. Section 433 remains intact, stating every refund claim must be made by filing a return under Section 263.

The result: even senior citizens and low-income earners with income below the exemption limit must file returns if tax has been deducted at source (TDS). Without filing, they can’t get a refund — and risk penalties for non-compliance.

“The perception from the Select Committee Report that small taxpayers would no longer need to file returns just to claim their refunds does not hold true,” wrote CA Rakesh Dhaniwal in Linkedin. “Section 433 of the new Income Tax Bill still mandates that a refund can be claimed only through a return of income, and no other method.”

The panel’s report cautioned that the current rule could “inadvertently lead to prosecution” for those with no taxable income. It urged that the law “should not compel a return merely to avoid penal provisions for non-filing.”