Refund relief for small taxpayers: What the panel recommends
A key Parliamentary Standing Committee has recommended refund relief for small taxpayers who miss the due date for filing their Income Tax Return (ITR). If accepted by the CBDT, this proposal could bring big relief to lakhs of individual filers and MSMEs who lose out on refunds simply due to delay in compliance.
Let’s break down what this recommendation means, its legal background, and what taxpayers should expect.
Why refund denial happens under current law
Under the Income-tax Act, 1961, if you miss the due date under Section 139(1), you can still file a belated return under Section 139(4).
However, Section 244A(2) states that no interest is payable on the refund for the period of delay attributable to the taxpayer.
For example:
- If a salaried person files a return on 30th September (instead of 31st July), and a refund is due, the interest under Section 244A(1) will be reduced proportionately.
- In some cases, the department may not allow any refund if the return is not filed within the extended timelines (i.e., beyond 31st December).
This has led to genuine hardship, especially for:
- First-time taxpayers
- MSMEs with limited access to advisors
What the Parliamentary panel has proposed
As per media reports (Economic Times, July 2025), the panel has recommended:
✅ A policy-level relief for small taxpayers where refund is denied solely due to delay in ITR filing
✅ Clear categorisation of such refund claims as “non-adversarial cases” where taxpayer fault is minimal
✅ A grace mechanism or window, especially for refunds below a threshold (say ₹1 lakh)
Keyphrase Subheading: Refund relief for small taxpayers – legal impact
If the CBDT accepts this recommendation, it may trigger:
- New refund circular under Section 119(2)(b), allowing condonation of delay in deserving cases
- Policy relaxation via CBDT Instructions or FAQ clarifications
- Revised system flagging in the CPC backend to auto-consider refund interest for small taxpayers
This aligns with the Taxpayer Charter, which promotes fairness and trust-based tax administration.
Who may benefit from this refund relief?
If implemented, this refund relief for small taxpayers could help:
- Salaried employees who miss ITR deadlines
- Small business owners with erratic income
- citizens without tech-savvy support
- Taxpayers with refund due from TDS, advance tax, or excess self-assessment tax
Expert View – What should taxpayers do now?
Tax Consultant Tip:
“Even if you’ve missed the deadline, don’t skip filing. File under Section 139(4) and preserve all refund proofs like Form 26AS, AIS, and bank TDS entries. If relief is notified later, these filings will serve as your refund claim base.”
Summary
A Parliamentary panel has proposed refund relief for small taxpayers who delay ITR filing. The aim is to prevent genuine refund loss due to procedural lapses. If accepted, CBDT may allow refund condonation under Section 119(2)(b) for low-value claims.
Action Plan for Taxpayers
Here’s what you should do even if the relief is not yet official:
- ✔ File your ITR even if belated
- ✔ Check refund eligibility in AIS/26AS
- ✔ Keep TDS certificates and challans ready
- ✔ Watch for CBDT circulars or condonation schemes
FAQs on refund relief for small taxpayers
Q1. Is this refund relief approved yet?
No. It’s a recommendation, not yet notified by the CBDT.
Q2. Can I get refund with late ITR?
Yes, but interest may be reduced or disallowed, depending on delay.
Q3. What is Section 119(2)(b)?
It empowers CBDT to condone delay and allow refund in genuine hardship cases.
Q4. What if my refund is under ₹50,000?
If the panel’s suggestion is accepted, such low-value refunds may be fast-tracked, even if return was delayed.
Final thoughts
The refund relief for small taxpayers recommendation could become a game-changer in India’s tax compliance ecosystem.
Until then, avoid delay and let Efiletax help you file accurately, on time, and claim every rupee you deserve.
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