The Income Tax Bill 2025 has raised concerns among taxpayers regarding refund eligibility if an Income Tax Return (ITR) is not filed before the due date. While the Income Tax Department (ITD) has clarified that there is no change in refund provisions, tax experts have pointed out inconsistencies that may impact individual taxpayers.
 

IT Department’s Clarification on Refunds

According to the Income Tax Act, 1961, taxpayers seeking a refund under Chapter XIX must file an income tax return under Section 239. The New Income Tax Bill 2025 now incorporates this provision into Section 263(1)(ix). The IT Department stated:

• Returns filed under Section 263 or in response to a notice under Section 268(1) will be processed under Section 270, determining any sum payable or refund due.
• Refunds, if due, will be granted under Section 271(1)(e).
• If an invalid return claims a refund, relief may be available under Section 239, corresponding to Section 119 of the Income Tax Act, 1961.

Thus, the department assures that refund eligibility rules remain unchanged.

Taxpayer Concerns Over New Refund Rules

Despite the clarification, several taxpayers and experts have raised concerns regarding:

1. Mandatory Due Date Filing for Refunds:

   • Clause 263(1)(a)(ix) of the New Income Tax Bill 2025 states that individuals seeking refunds under Chapter XX must file ITR within the due date.
   • This is different from the current Income Tax Act, 1961, where even a belated return (filed by December 31 of the assessment year) allows for a refund claim.

2. Clause 433 and Refund Filing Restrictions:

   • Clause 433 mandates that a refund must be sought only at the time of filing the return.
   • This could lead to hardships for taxpayers who miss deadlines due to genuine reasons like medical emergencies, technical glitches, or delayed TDS credit information.

3. Impact on Taxpayers with Excess TDS Deductions:

   • Under the current system, if excess TDS is deducted, taxpayers can claim a refund even with a late ITR filing.
   • With the new tax bill, they may be barred from claiming refunds if they miss the due date.

Expert Opinions on Refund Eligibility Changes

• A tax expert told The Economic Times, "Under the new law, taxpayers who miss the ITR deadline may be ineligible for refunds. This could significantly impact salaried individuals and small business owners who rely on TDS refunds."
• A tax advisory firm added, "The current Income Tax Act does not prevent refunds for late filers. However, the new bill suggests that refunds are only possible if ITR is filed before the due date."

Current vs New Refund Provisions

Is the Refund Rule Changing?

While the IT Department insists that refund-related provisions remain unchanged, tax experts believe that new clauses in the Income Tax Bill 2025 create barriers for late filers. If the government enforces strict due-date-based refund eligibility, taxpayers who miss deadlines due to valid reasons could face financial hardships.
 

Taxpayers should stay updated on final clarifications before the bill is enacted. Filing ITR within the due date is now more crucial than ever to avoid potential refund denial.