In a major relief for salaried employees, the government is planning to simplify the process of claiming TDS (Tax Deducted at Source) refunds. Currently, taxpayers whose income is below the taxable limit or those who have already invested in tax-saving instruments are still required to file a full Income Tax Return (ITR) to claim back excess TDS. This process has long been seen as cumbersome and unnecessary, particularly for low-income earners. A new provision is expected to be introduced in the upcoming Income Tax Bill 2025, which aims to address this issue by easing compliance.
New Form to Replace Full ITR for TDS Refunds
According to Hindustan Times, a special committee has recommended a simplified refund system for taxpayers earning below the taxable threshold. The proposal suggests allowing such individuals to file a basic form instead of a full ITR to claim their TDS refunds. This form will be linked to Form 26AS, a consolidated tax statement that shows all TDS deducted during the year. The Central Board of Direct Taxes (CBDT) is currently working on designing this simplified form. It will auto-fill TDS data, removing the need for manual input and making the refund process significantly quicker and easier.
Low-Income Taxpayers to Benefit from Streamlined Process
Under the current tax regime, annual income up to ₹12.75 lakh is exempt from tax. However, companies often deduct TDS from employee salaries if investment or expense proofs are not submitted in time. In such cases, even individuals who owe no tax end up filing full ITRs solely to get their money back. The proposed change will eliminate this unnecessary burden. It will be especially beneficial for those with limited income who currently face procedural challenges in claiming their rightful refunds. The streamlined process aims to offer them both convenience and faster processing of refunds.
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New Tax Rules Expected by April 2026
In addition to easing refund claims, the committee has also recommended clear guidelines regarding data access for tax authorities. To improve transparency, the new Income Tax Bill will include provisions granting officials access to taxpayers’ digital devices, income-expense records, and electronic data when required. These reforms are expected to be tabled during the 2025–26 Union Budget session of Parliament. Once passed, the new system will likely come into effect from April 1, 2026. If implemented as planned, it will benefit millions of low-income taxpayers by reducing their compliance burden and improving the overall tax refund process.