New Income Tax Bill 2025: Taxpayers to Receive Refunds Even for Late ITR Filings – Here’s What It Means

The government has introduced a major relief for taxpayers in the latest version of the Income Tax Bill, 2025. Under the new provisions, individuals who file their Income Tax Returns (ITR) after the deadline will still be eligible to receive refunds. This is a significant change from the earlier draft, which denied refunds for late filings.

The revised bill was passed in the Lok Sabha on August 11, 2025, after the government accepted several recommendations from a 31-member parliamentary committee led by BJP MP Baijayant Panda. The new Income Tax Act is set to come into effect from April 1, 2026.

Refunds Allowed for Late and Revised Returns

In the first draft of the Income Tax Bill, taxpayers who filed their returns after the due date—commonly referred to as belated returns—were not entitled to refunds. This provision faced criticism from tax experts, who argued that it was unfair to taxpayers entitled to a legitimate refund simply because of a delay in filing.

The updated bill has addressed this concern. Now, even if a taxpayer files their ITR after the deadline, they will still be eligible to receive a refund, provided they have overpaid taxes. This applies not only to belated returns but also to revised returns filed to correct earlier mistakes.

For example, if the official deadline for filing ITR is July 31 (September 15 in 2025 due to extensions), a taxpayer who files after this date but within the allowed belated return period can still claim their refund—though late fees and interest on due taxes will still apply.

Committee Recommendations Shape the Bill

The parliamentary committee had suggested removing Clause 263, sub-clause (1)(IX) from the original bill, which restricted refunds for late filers. Mayank Mohanka, Founder and Director of TaxAaram.com, noted that the acceptance of this recommendation means refund processing will no longer depend on meeting the original filing deadline.

“This ensures that taxpayers will not lose their right to a refund simply because they missed the initial deadline. It’s a step towards a more taxpayer-friendly system,” Mohanka explained.

Changes to Standard Deduction Rules for Property Owners

Apart from the refund-related relief, the new bill also modifies how standard deduction is calculated for income from house property.

Previously, the 30% standard deduction was applied to the total annual value of the property without accounting for municipal taxes. Under the revised rules, municipal taxes will first be deducted from the property’s value before applying the standard deduction.

For instance, if a property’s annual value is ₹100 and the owner pays ₹5 in municipal taxes, the standard deduction will now be calculated on ₹95, not ₹100. Tax experts believe this change will reduce future disputes regarding the deduction amount and bring greater clarity for property owners.

Why These Changes Matter

These adjustments in the Income Tax Bill, 2025, reflect a broader move towards simplifying the tax system and reducing unnecessary penalties for taxpayers. While timely filing is still encouraged to avoid penalties and interest charges, the new refund provision ensures that taxpayers are not doubly penalized by losing their rightful refunds.

With the bill’s implementation set for April 1, 2026, financial advisors recommend taxpayers familiarize themselves with the changes, especially those related to filing timelines, property income calculations, and deduction rules.