The Delhi High Court has sought the Central government’s response to a public interest litigation (PIL) that challenges the requirement of filing an Income Tax Return (ITR) to claim a refund of Tax Deducted at Source (TDS), even when an individual has no income tax liability and is otherwise exempt from filing returns.
According to reports by ANI and Bar and Bench, a Division Bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia issued notice to the Centre on Wednesday and granted time to file its reply. The matter has been listed for further hearing on November 6.
The PIL, filed by Aakash Goel, questions the validity of Section 433 of the Income Tax Act, 2025, which requires taxpayers to file an ITR to claim a refund. The petitioner has asked the High Court to read down the provision to the extent that it makes return filing compulsory for refund claims by people who are otherwise not required to file ITRs.
The petition argues that the issue affects a large number of taxpayers whose employers or banks deduct TDS during the financial year, but whose taxable income eventually falls below the exemption threshold after accounting for deductions, exemptions or other eligible benefits. Although such individuals have no tax liability, they must currently file an ITR solely to recover the tax already deducted.
Apart from challenging the legal provision, the petitioner has sought directions to the Union government and the Central Board of Direct Taxes (CBDT) to introduce an automatic or suo motu TDS refund mechanism for eligible taxpayers. The plea also seeks the immediate refund of unclaimed TDS of up to Rs 5,000, along with interest, for assessment years 2023-24 to 2025-26 without requiring ITR filing or fresh verification.
Citing official Income Tax Department data, the petition states that around 2.35 crore individuals had TDS credits but did not file income tax returns for assessment year 2023-24 despite many of them being eligible for refunds. It also relies on government figures to claim that around 8.59 crore individuals had TDS of Rs 5,000 or less during financial year 2023-24, while nearly 7.51 crore had TDS of Rs 1,000 or less.
According to the petitioner, the existing framework disproportionately impacts senior citizens, blue-collar workers, daily wage earners, low-income individuals and small depositors, many of whom lack the financial resources or technical ability to file returns merely to recover relatively small amounts.
The plea argues that the Income Tax Department already possesses the required information through PAN, Aadhaar, Form 26AS and TDS records, making it possible to process eligible refunds automatically without insisting on a separate compliance requirement. It also contends that while the department has built advanced technology to detect tax evasion and identify non-filers, a comparable technology-driven system has not been implemented to return excess TDS to taxpayers who ultimately owe no tax.
Calling the current arrangement unconstitutional, the petition states, “This continued retention of funds from individuals with zero tax liability constitutes a clear violation of Article 265 of the Constitution of India, as the State possesses no legal authority to hold these sums once the absence of a tax debt is established.”
It further argues, “This framework runs directly counter to the State’s stated public policy of ‘Ease of Living’, as the financial and digital cost of filing a return for a daily wage earner or a small depositor often exceeds the refund amount itself.”
The PIL also refers to the Parliamentary Select Committee’s recommendation on the Income Tax Bill, 2025, which had suggested removing the mandatory ITR filing requirement for claiming refunds, describing it as burdensome for small taxpayers. According to the petitioner, the recommendation was not incorporated into the final legislation.
Source from: https://www.moneycontrol.com/news/india/automatic-tds-refunds-without-itr-filing-delhi-high-court-seeks-centre-s-reply-here-s-why-13995800.html
