ATTENTION taxpayers! Small taxpayers not exempted from ITR filing under new tax bill 2025, late filers can now claim refunds; Check details

The new Income Tax Bill also gives big tax relief to the family members of deceased employees. It allows for 100% tax deduction on..., read on to know more.

The Lok Sabha has passed the new Income Tax Bill, 2025, which clearly says that people who file their tax returns late can still get a refund if extra tax was deducted during the year. However, experts pointed out that the bill does not remove the rule that forces small taxpayers to file a return just to get their refund. The new provision removes Clause 263(1)(ix), which earlier stopped late filers from getting their TDS refund. This change will apply from April 1, 2026, after the bill becomes law.

The bill keeps Section 433 as it is. This rule says that anyone who wants a refund must file an income tax return under Section 263. This means there is still no other way to claim a refund. So, even small taxpayers, including senior citizens, whose income is below the tax-free limit, will still have to file a return if they want their TDS refund.

The parliamentary committee had earlier suggested that people should not be forced to file a tax return only to avoid penalties. It said that the current rule, which requires filing a return just to claim a refund,  could even lead to legal action against small taxpayers whose income is below the taxable limit but who still have TDS deducted. In such cases, the committee felt, the law should not make them file a return just to escape penalties for non-filing.

Full tax relief on pension and gratuity for families of deceased employees

The new bill offers major tax relief to the families of employees who have passed away. It provides a 100 per cent tax deduction on:

• Commuted pension (the lump-sum pension amount)
• Gratuity received after the employee’s death

This benefit, mentioned under Clause 93 of the bill, will apply to pensions received from specific funds listed in Schedule VII.

Preeti Sharma, Partner at Global Employer Services, Tax and Regulatory Services, BDO India, said the biggest benefit of the new law is that it is easier for the common man to understand compared to the old one. She added that the updated bill includes most of the changes suggested by the Select Committee. However, taxpayers will still have to figure out which tax regime suits them best before filing their returns. Also, there are no changes to the tax rates announced in Budget 2025.

The new bill was passed after taking into account the recommendations of a 31-member parliamentary panel led by BJP MP Baijayant Panda.