Govt to Resolve Refund Anomaly in New Income Tax Bill 2025: Relief for Belated Filers Likely
In a significant move aimed at providing relief to taxpayers, the Indian government is reportedly set to amend a controversial refund provision within the new Income Tax (I-T) Bill, 2025. This provision, as currently drafted, risked denying refunds to individuals who file their Income Tax Returns (ITR) after the stipulated due date.
According to a senior official in the finance ministry, the government acknowledges the contradiction embedded within the proposed legislation and is likely to rectify it before the Bill is finalized. The new Income Tax Bill, 2025, which aims to replace the more than six-decade-old Income Tax Act, 1961, has been under scrutiny for certain clauses that appeared to introduce harsher conditions for claiming refunds.
The core of the issue lies in the interplay of two specific sections within the Bill. Section 433 of the new I-T Bill broadly states that a refund must be claimed by furnishing a return of income. However, a separate clause, Section 263(1)(a)(ix), had caused considerable concern by specifying that to qualify for a refund, the return must be filed on or before the due date. This created a clear contradiction, implying that belated returns, even if otherwise valid, would not be eligible for refunds.
Tax experts and industry bodies had raised red flags over this apparent tightening of refund norms. Under the existing Income Tax Act, 1961, taxpayers are generally able to claim refunds even if they file a belated return, provided it is submitted within the extended deadlines allowed for such filings. The proposed restriction in the 2025 Bill was seen as a potential hardship for many genuine taxpayers who might miss the initial deadline due to various unavoidable circumstances.
The finance ministry official’s statement indicates a positive response to these concerns. The government’s intention to amend this provision signals its commitment to creating a taxpayer-friendly regime, a key objective of the comprehensive tax reform. While the exact wording of the amendment is yet to be revealed, it is expected to align Section 263(1)(a)(ix) with Section 433, ensuring that the act of filing a return, regardless of whether it’s belated (within permissible limits), remains sufficient for claiming a refund.
This anticipated amendment will come as a welcome relief to a large segment of the taxpayer population. It underscores the government’s iterative approach to legislative reforms, taking into account feedback from stakeholders to ensure that new laws are not only comprehensive but also practical and equitable. As the Income Tax Bill, 2025, moves through the parliamentary process, taxpayers will be keenly watching for these crucial adjustments that will shape the future of tax compliance and refunds in India.
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