Income Tax Bill 2025: Big Relief for Small Taxpayers – ITR Filing May No Longer Be Mandatory for Refunds

If your income is below the taxable limit but you still file an Income Tax Return (ITR) solely to claim a TDS refund, there’s good news on the horizon. A key recommendation in the draft Income Tax Bill 2025 could free you from this obligation, offering significant relief to lakhs of small taxpayers.

📜 What’s the Issue?

Under the current system, even if your income is below the taxable threshold, but TDS (Tax Deducted at Source) has been deducted—such as from a bank FD or pension—you are required to file an ITR in order to claim a refund.

If you fail to file the ITR within the deadline, penalties or even prosecution may follow—despite having no tax liability.

👥 Who Is Affected the Most?

This outdated provision mainly affects individuals with limited income, such as:

• Senior citizens

• Pensioners

• Temporary or contract workers

• Small investors (especially those with FD interest where TDS is deducted)

Most of these individuals are not required to pay tax, but are forced to file returns only to claim refunds, adding to their financial and procedural burden.

📌 What Has the Committee Recommended?

The Lok Sabha Select Committee, headed by MP Baijayant Panda, has recommended removing sub-clause (1)(ix) of Section 263, which currently mandates ITR filing to claim a refund.

Their report notes that filing an ITR just for refunds is an unnecessary burden on low-income groups, and the threat of prosecution in such cases is unfair.

✅ What Will Change If the Suggestion Is Accepted?

• Individuals with income below the basic exemption limit will not be required to file an ITR just to claim a refund.

• They will be free from penalties or legal threats.

• This will improve the system’s simplicity, accessibility, and fairness.

🔍 Timeline of the Bill

Event	Date
Bill Introduced in Lok Sabha	February 13, 2025
Sent to Select Committee	Same day
Committee Report Submitted	July 21, 2025
Committee Chairperson	Baijayant Panda
Total Members	31 MPs

💡 What This Means for You

If you only file an ITR every year for the purpose of getting a TDS refund, this requirement might soon be waived. For senior citizens, pensioners, and low-income individuals, this could mean less paperwork and stress, making the income tax system more taxpayer-friendly.

🗣️ Final Thought

If the recommendation becomes law, it will mark a major shift toward simplifying tax compliance and respecting the time and dignity of honest taxpayers. It will reduce administrative burden and encourage more individuals to engage with the tax system willingly.

Stay tuned as this bill progresses through Parliament—it could transform the way small taxpayers handle their income and refunds.