Income Tax Bill 2025 May Ease Burden on Small Taxpayers Claiming Refunds

New Delhi:

Pensioners, temporary employees, and senior citizens are among the small taxpayers who may soon benefit from not having to file income tax returns just to get a refund. After examining the draft Income-Tax Bill, 2025, the Lok Sabha Select Committee made some important recommendations that could lessen the burden of compliance and avoid needless penalties for those whose income falls below the taxable threshold. 

According to the Bill's draft provisions, people whose total income is less than the basic exemption threshold must still file a return if tax has been withheld at source (TDS). Penalties and, in certain situations, even prosecution may result from failing to comply within the allotted time.

According to the Committee's observations, small taxpayers are now facing procedural difficulties as a result of this clause. "For small taxpayers whose income is below the taxable threshold but from whom tax has been deducted at source, the current mandatory requirement to file a return solely for the purpose of claiming a refund could unintentionally lead to prosecution," the Committee stated. It went on to say that these people shouldn't be forced to file returns just to get out of paying penalties. 

Subclause (1)(ix) of Clause 263 of the Income-Tax Bill, which requires return filing for refund purposes even in cases where the taxpayer has no legal obligation to pay income tax due to their income level, should be removed. This is the main recommendation.

Many people are anticipated to gain from the proposed change, especially those who depend on contract labor, pensions, or fixed deposits. Even though their total income is not taxable, these taxpayers frequently have automatic TDS deductions from banks or employers. Citizen groups and tax advisors have consistently expressed concern about the burden of filing returns to recover small sums and the fear of penalties for missing deadlines. 

The Committee said, "This change would bring procedural fairness into the system," highlighting the need to make tax laws easier to understand and less daunting for those who are not subject to taxes but are nevertheless enticed to use the system because of TDS procedures.

This suggestion would be a step toward a simpler and more inclusive tax administration process if it were approved by the Finance Ministry. According to experts, this action could ease the burden on the tax department, cut down on the number of pointless filings, and increase public confidence in the government. 

Later this year, the final draft of the Income-Tax Bill, 2025, is anticipated to be presented to Parliament, with changes made in response to suggestions made by the Committee and comments from the general public.