The Income Tax Bill 2025 proposes a change that could bring significant relief to millions of small taxpayers. Currently, even if your income is below the taxable limit but TDS (Tax Deducted at Source) is deducted from your earnings, you have to file an income tax return to get that money back. This requirement may now be eliminated.
Recommendation of the Select Committee
The Select Committee of the Lok Sabha, while reviewing the draft of the Income Tax Bill 2025, has suggested a major change. The Committee has recommended removing sub-clause (1)(ix) of Section 263. This clause currently mandates that if a taxpayer wants a refund, they must file an ITR, even if their income is below the taxable limit.
The Committee believes that this provision has become an unnecessary burden on small taxpayers. Often, people who are not in the tax bracket file returns only because TDS has been deducted, and there is no other way to get it back.
Who Will Benefit Directly
This proposal is likely to benefit those with limited income who generally do not fall within the tax bracket the most.
- Senior citizens who receive pensions and whose income is below the basic exemption limit
- Small investors whose fixed deposits generate income on which banks deduct TDS
- Contract or temporary workers whose salaries are limited but are also subject to TDS by employers
Current Situation
Currently, if a person does not fall within the tax bracket but TDS has still been deducted from their bank or salary, they are required to file an ITR to get a refund. If they do not file the return on time, they may be subject to a late filing penalty or face legal action.
What Could Change
If the Select Committee's recommendation is accepted, those with income below the taxable limit will no longer be compelled to file returns just to get a refund.
This will simplify the system and relieve such people from the hassle of repeated ITR filings. It will also reduce the burden on the tax department, as millions of such returns are filed every year solely for refunds.
What the Report Says
According to the Committee's report, forcing low-income taxpayers to file ITRs just to get a refund is practically wrong. It creates unnecessary legal risks and fear. Therefore, this provision should be removed to make the tax system more practical and taxpayer-friendly.
Parliamentary Journey of the Bill
The Income Tax Bill 2025 was introduced in the Lok Sabha on February 13, 2025.
On the same day, the bill was sent to the Select Committee.
The Select Committee's report was presented on July 21, 2025, chaired by BJP MP Baijayant Panda.
This committee included a total of 31 Lok Sabha MPs who considered various aspects in detail.
Further Process
Now, it will be interesting to see whether the government incorporates this recommendation into law. If this proposed change is passed, it could be a major relief for millions of small taxpayers, not only simplifying their procedure but also freeing them from the fear of unnecessary penalties or punishment.
This proposal is considered a major step towards making the tax system more humane and understanding.
