The Delhi High Court has issued a notice to the Central government, calling for a response to a Public Interest Litigation (PIL) that advocates for the automatic refund of Tax Deducted at Source (TDS) to individuals who are not liable to pay taxes and are exempt from filing Income Tax Returns (ITR) except for claiming refunds. The bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia has requested the government’s reply by November 6, when the case is set to be heard.
The Core Issue
This legal matter concerns individuals who initially have TDS deducted by employers but later find themselves outside the taxable income bracket after accounting for various exemptions. Under current regulations, these individuals are compelled to file an ITR solely to secure a refund of the TDS. The PIL filed by Aakash Goel argues against this requirement, advocating for a simpler refund process.
Petitioner’s Argument
Aakash Goel’s petition challenges the stipulations of Section 433 of the Income Tax Act, 2025, which mandates the filing of an ITR to claim refunds. Goel demands an immediate refund of unclaimed TDS amounts up to ₹5,000, with interest, for assessment years 2023-24 to 2025-26, without needing to file an ITR or undergo fresh verification. Furthermore, he proposes the establishment of a permanent mechanism for automatic refunds to individuals with no tax obligations.
According to Goel, approximately 2.35 crore individuals had TDS credits but did not file returns for the assessment year 2023-24, despite being eligible for refunds. He cites official statistics indicating that in the financial year 2023-24, around 8.59 crore individuals had TDS deductions of ₹5,000 or less, with nearly 7.51 crore of them having TDS deductions of ₹1,000 or less.
Constitutional Concerns
The petition highlights a potential violation of Article 265 of the Indian Constitution, which asserts that the government cannot retain funds from individuals once no tax liability exists. It argues that requiring economically vulnerable groups like low-income earners, senior citizens, and daily wage workers to file ITRs for small refunds is excessively burdensome and economically impractical.
Goel further contends that the current system contradicts the government’s “Ease of Living” policy. The financial and digital burden of filing a tax return can outweigh the refund for groups such as small depositors or daily wage earners, making the process counterproductive.
