Income Tax Bill 2025: Concerns have been raised regarding whether individuals who submit their tax returns after the deadline will be ineligible for refunds once the new Income Tax Bill is enacted. These worries have surfaced following the introduction of the Income Tax Bill 2025 in the Lok Sabha. Both ordinary taxpayers and numerous experts have voiced similar concerns on social media, suggesting that the proposed legislation includes a provision that denies refunds to those who file their Income Tax Returns (ITR) late.
Many individuals are advocating for amendments to this provision, arguing that it imposes unnecessarily harsh conditions on taxpayers. In response to these concerns, the Income Tax Department has sought to clarify the situation.
Who can claim refund?
The issue stems from clause 263(1)(a)(ix) of the Income Tax Bill 2025, which stipulates that taxpayers must submit their returns within the designated timeframe to be eligible for a refund. This clause represents a significant departure from the existing Income Tax Act of 1961, which allows taxpayers to claim refunds even if they file their returns late, up until December 31.
Additionally, clause 433 of the new bill specifies that refunds can only be claimed at the time of filing returns, heightening fears that taxpayers who miss the deadline will forfeit their right to a refund, even if excess tax has been deducted from their income. Under the current legislation, taxpayers can reclaim any overpaid tax if they can demonstrate that their tax payments exceed their actual liability.
According to Section 237, taxpayers who have overpaid their taxes are entitled to a refund. Section 139 establishes July 31 as the deadline for individual taxpayers to file their ITRs, while Section 139(4) permits the submission of belated returns until December 31, during which time refunds can still be claimed. Furthermore, Section 234(F) imposes a penalty of Rs 5,000 for late ITR submissions, which is reduced to Rs 1,000 for individuals with an annual income below Rs 5 lakh. However, the right to claim a refund remains intact.