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| Latest News on ITR and Tax Refunds Navigating the 2025 Tax Season |
As the financial year 2024-25 nears its end, the spotlight is once again on Income Tax Returns (ITR) in India and globally, with significant updates shaping how taxpayers file, comply, and benefit from tax regimes. From the introduction of new tax bills to extensions of filing deadlines, technological advancements in e-filing, and shifting compliance trends, the world of ITR is undergoing a transformation. As of February 28, 2025, the latest news reveals a mix of relief for taxpayers, stricter compliance measures, and debates over tax policy reforms. This article explores these developments in depth, offering insights into what they mean for individuals, businesses, and the broader economy.
A New Era: The Income Tax Bill 2025 in India
One of the most significant pieces of news in the ITR domain is the tabling of the Income Tax Bill 2025 in India’s Lok Sabha by Finance Minister Nirmala Sitharaman. This bill aims to replace the 63-year-old Income Tax Act of 1961, a landmark legislation that has governed India’s direct tax system for decades. The new bill promises a simpler, more streamlined tax framework by eliminating outdated provisions and reducing legal jargon, making it more accessible to the average taxpayer. Announced earlier in February 2025, this move has been hailed as a major relief for the middle class, with the government emphasizing its intent to ease compliance burdens.
The bill introduces several key changes. For instance, it extends the window for filing updated returns from two years to four years, giving taxpayers more flexibility to correct errors or omissions. However, this comes with a catch: voluntary compliance in the third or fourth year via updated returns could incur higher costs compared to responding to reassessment notices from the tax department. Critics argue that while the extended timeline is a win, the increased cost might deter taxpayers from taking advantage of it unless absolutely necessary.
Another debated provision is the requirement to file ITR before the due date (typically July 31 for salaried individuals) to claim refunds under the new bill. This marks a departure from the existing Income Tax Act, which allowed refunds even for belated filings until December 31 of the assessment year. The Income Tax Department has clarified that refund-related provisions remain unchanged for now, but taxpayers are advised to stay vigilant as the bill progresses through parliamentary discussions.
Filing Deadlines and Extensions: A Relief for Taxpayers
The Central Board of Direct Taxes (CBDT) has been active in addressing taxpayer concerns, particularly around filing deadlines. For the Assessment Year (AY) 2024-25 (covering Financial Year 2023-24), the deadline for belated and revised ITRs was extended from December 31, 2024, to January 15, 2025, following an interim order from the Bombay High Court. This extension was prompted by a Public Interest Litigation (PIL) filed by The Chamber of Tax Consultants, which highlighted issues with the ITR software denying eligible taxpayers the Section 87A rebate on special income like short-term capital gains. The CBDT’s decision provided much-needed breathing room for resident individuals to file or revise their returns, ensuring they could claim rebates and avoid penalties.
Looking ahead to AY 2025-26 (covering FY 2024-25), ITR filing is set to commence on April 1, 2025, with the deadline for salaried taxpayers pegged at July 31, 2025. The Income Tax Department continues to encourage early filing, emphasizing the convenience of the e-filing portal, which now offers pre-filled returns with details like salary income, bank interest, and dividends. This technological upgrade aims to reduce errors and expedite processing, a trend that has gained traction in recent years.
Surge in High-Income Filers: A Sign of Economic Growth?
A striking development reported in February 2025 is the 43% surge in ITR filers with income exceeding ₹1 crore in FY 2024-25, according to data from Business Today and The Hindu BusinessLine. The number of such high-income filers rose from over 2.24 crore in FY 2021 to over 3.21 crore in FY 2025, reflecting improved compliance and robust economic growth in sectors like technology, finance, and real estate. Overall, the total number of ITR filers grew to 9.05 crore, a 6.8% increase from the previous year.
This surge is attributed to multiple factors, including legal reforms like the Goods and Services Tax (GST), which has enhanced transparency, and technological advancements such as the updated Form 26AS. The form now includes comprehensive details of tax deductions, financial transactions, and pending proceedings, nudging taxpayers to disclose their true income. Minister of State for Finance Pankaj Chaudhary recently highlighted these government initiatives in a Lok Sabha reply, crediting them for the uptick in filings.
However, the data also raises questions about income inequality. While high-income filers are growing, the broader tax base remains narrow, with only 6.68% of India’s population filing ITRs in FY 2023-24, as noted by Union Minister Chaudhary in Parliament. This disparity underscores the challenge of expanding tax compliance among lower and middle-income groups, despite relief measures like the increased zero-tax threshold of ₹12 lakh under the new tax regime announced in Budget 2025.
Technology and Compliance: The Role of the E-Filing Portal
The Income Tax e-filing portal has become a cornerstone of ITR filing, with its user-friendly interface and pre-filled forms simplifying the process. For AY 2025-26, taxpayers can log in using their PAN/Aadhaar, select the appropriate ITR form based on income sources, and e-verify their returns via Aadhaar OTP, net banking, or Digital Signature Certificate (DSC). The portal’s recommendation feature for eligible ITR forms has been a game-changer, reducing the risk of choosing the wrong form—a common pitfall in the past.
Recent updates to ITR Forms 2 and 3, introduced in January 2025, allow taxpayers to claim the Section 87A rebate more seamlessly, addressing earlier software glitches that sparked the Bombay High Court case. These changes reflect the government’s commitment to leveraging technology for taxpayer convenience, though challenges remain. Some taxpayers report delays in refund processing, while others face penalties for errors despite filing on time, highlighting the need for further refinement.
The New vs. Old Tax Regime Debate
The Budget 2025 announcement of a zero-tax threshold up to ₹12 lakh under the new tax regime has reignited the debate between the new and old tax regimes. The new regime, introduced in 2020, offers lower rates but fewer exemptions, while the old regime allows deductions for investments like PPF and insurance. Salaried taxpayers can still choose either regime for AY 2025-26, but those with business income default to the new regime unless they opt out.
Tax experts caution that even with a ₹12 lakh threshold, individuals earning between ₹4 lakh and ₹12 lakh must file ITRs to claim the Section 87A rebate, which offsets their tax liability to zero. Failure to file could trigger penalties or notices from the Income Tax Department, a nuance that has confused many taxpayers. Meanwhile, the increased standard deduction (from ₹50,000 to ₹75,000) and family pension deduction (from ₹15,000 to ₹25,000) under the new regime, effective from FY 2024-25, offer additional savings of up to ₹17,500 annually.
Global Perspectives: ITR Trends Beyond India
While India dominates ITR news in the provided context, global trends offer a comparative lens. In the United States, the Internal Revenue Service (IRS) opened its 2025 tax season in late January, with a filing deadline of April 15, 2025, for most taxpayers. The IRS has emphasized digital filing and direct deposit refunds, mirroring India’s push for e-filing. However, unlike India’s focus on simplifying tax laws, the U.S. grappled with debates over extending Trump-era tax cuts, set to expire in 2025, reflecting differing priorities in tax policy reform.
In the European Union, countries like Germany and France continue to refine their digital tax platforms, with Germany introducing real-time tax reporting for businesses in 2025. These global efforts underscore a universal shift toward technology-driven tax administration, though India’s ambitious overhaul via the Income Tax Bill 2025 stands out for its scope and intent.
Challenges and Controversies
Despite the positive strides, ITR filing in 2025 is not without challenges. The Section 87A rebate controversy, which led to the January 15 deadline extension, exposed flaws in the tax department’s software and communication. Taxpayers who couldn’t claim rebates on special income faced unexpected demands, prompting calls for automatic refunds—a solution yet to be implemented.
Moreover, the narrow tax base remains a concern. With less than 7% of Indians filing ITRs, experts argue that relief measures like the ₹12 lakh threshold must be paired with aggressive outreach to informal sector workers. The surge in high-income filers, while encouraging, also fuels debates over wealth taxes, with some advocating for a progressive surcharge beyond the current 10-37% range for incomes above ₹50 lakh.
Looking Ahead: What Taxpayers Should Expect
As AY 2025-26 approaches, taxpayers should prepare for several key dates and changes:
- April 1, 2025: ITR filing begins for FY 2024-25.
- July 31, 2025: Deadline for salaried taxpayers to file without penalty.
- March 31, 2025: Last date to file updated ITRs for AY 2021-22 and AY 2022-23, with penalties for late filing.
The Income Tax Bill 2025, if passed, will reshape compliance norms, potentially requiring stricter adherence to due dates for refunds. Taxpayers are advised to leverage the e-filing portal’s pre-filled data and consult professionals to navigate the new regime’s nuances.
Conclusion
The latest news on ITR as of February 28, 2025, paints a picture of progress tempered by challenges. India’s bold move to overhaul its tax law, coupled with deadline extensions and technological upgrades, signals a taxpayer-friendly shift. Yet, issues like refund delays, software glitches, and a limited tax base highlight the work ahead. Globally, the push for digital tax systems reflects a shared goal of efficiency, but India’s scale and ambition set it apart. As taxpayers gear up for the next filing season, staying informed and proactive will be key to navigating this evolving landscape.
