The Indian government is reportedly planning to amend a controversial provision in the new Income Tax Bill, 2025, bringing significant relief to taxpayers. This move aims to fix a contradiction in the bill regarding tax refunds.
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Currently, Section 433 of the new I-T Bill states that taxpayers can claim a refund by filing a return, even if it’s submitted late. However, Section 263(1)(a)(ix) directly contradicts this by stipulating that the return must be filed on or before the deadline to be eligible for a refund. This inconsistency could have unfairly denied refunds to taxpayers who filed their returns after the due date. The proposed amendment seeks to resolve this, aligning the new bill with existing practices that generally allow refunds even for belated returns, albeit with certain conditions.
Bill’s Journey Through Parliament
Union Finance Minister Nirmala Sitharaman introduced the Income Tax Bill, 2025, in Parliament in February. It was subsequently sent to a select committee for examination. The committee is expected to present its report on the first day of the upcoming monsoon session. While earlier reports suggested minimal changes, the Business Standard’s update specifically highlights this crucial amendment to the refund provision.
Why a New Bill?
The new I-T Bill aims to replace the Income Tax Act of 1961 with a simplified and modernized version. Its core objectives include:
- Simplifying India’s tax framework: Making tax laws easier to understand and navigate.
- Reducing complexity: Eliminating outdated provisions and streamlining regulations.
- Introducing structural reforms: For instance, a unified ‘tax year’ will replace the current dual financial year and assessment year system.
- Improving clarity and compliance: Aiming to reduce disputes and encourage more taxpayers to comply with regulations.
If passed, the new law is slated to take effect from April 1, 2026.
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