NEW DELHI: The Select Committee of Lok Sabha on the Income Tax Bill, 2025, has recommended removing the mandatory requirement to file a return solely for the purpose of claiming a refund. It argued that this requirement could inadvertently lead to prosecution, particularly for small taxpayers whose income falls below the taxable threshold but from whom tax has been deducted at source.
The committee suggested that the law should not compel a return merely to avoid penal provisions for non-filing. Therefore, it recommended the removal of sub-clause (1)(ix) from Clause 263 to provide flexibility for allowing refund claims in cases where the return is not filed by the due date.
Clause 263.1 of the Bill lists the persons and entities who are required to file income tax returns. Clause 263.1 (ix) specifically mentions 'a person who intends to make a claim of refund'.
According to the Select Committee report, stakeholders who advocated for the omission of this sub-clause argued that Clause (ix), as initially proposed, had the effect of denying a refund to a person if the Return of Income was delayed beyond the specified due date.
However, tax experts have contended that the legislature's intent is not to deny a refund to an assessee solely because the income return has been filed after the due date. They argue that the presence of clause (ix) in section 263(1)(a) leads to an unintended interpretation that an assessee must file the Return of Income within the due date to claim a refund. "The clause (ix) does not serve any purpose since it is certainly permissible for a person to furnish a belated return. Accordingly, the omission of the same would avoid unnecessary confusion and unintended hardship to the assessee,” they explain.
Who are exempted from filing I-T returns?
Individuals earning below the taxable income threshold are exempt from paying income tax. This limit stands at ₹2.5 lakhs annually under the old tax regime and ₹3 lakh under the new tax regime. Additionally, those whose only income source is agriculture or farming are typically exempt from filing income returns, though a threshold for agricultural income may necessitate filing. Certain Non-Resident Indians (NRIs) are also exempt if their income exclusively comes from dividends or interest, or if it's already subject to TDS. Lastly, senior citizens over 75 years of age, whose income consists solely of pension and interest, can also be exempt from filing their ITR.