While the new Income Tax Bill, 2025 is designed to simplify tax laws and help taxpayers, it still contains a significant catch for small earners.
What’s New and What’s Missing
The bill, based on recommendations from a parliamentary panel led by BJP MP Baijayant Panda, now allows taxpayers who file returns after the due date to claim refunds for excess taxes deducted. This is a welcome change that closes a long-standing loophole for late filers.
However, the new law failed to incorporate another key recommendation from the panel: allowing refunds without requiring taxpayers to file a return.
The Problem with Section 433
The bill leaves Section 433 intact, which states that a refund can only be claimed by filing an income tax return. This means that even people who earn below the exemption limit, like senior citizens or low-income earners, must file a return if tax has been deducted at source (TDS). If they don’t, they can’t get their money back and could even face penalties for non-compliance. As the parliamentary panel warned, this rule could “inadvertently lead to prosecution” for those with no taxable income, forcing them to file a return just to avoid legal issues.