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Informist, Wednesday, Aug. 5, 2026

 

NEW DELHI – The Delhi High Court Wednesday issued notices to the government, the Department of Revenue under the Ministry of Finance, and the Central Board of Direct Taxes on a petition seeking automatic refund of tax deducted at source for individuals who have no tax liability. These persons are subjected to tax deducted at source but later fall outside the tax bracket when various exemptions are claimed, said the petitioner, adding that these individuals have to file an income tax return for claiming the refund. The bench of Chief Justice Devendra K. Upadhyaya and Justice Tejas Karia will hear the petition filed by Aakash Goel on Nov. 6.

 

The petitioner has sought reading down Section 433 of the Income Tax Act, 2025, so as to interpret the requirement of furnishing return as being applicable only to those persons who are otherwise mandated to file a return of income under Section 263(1) of the Act. Section 433 of the Income Tax Act, 2025 outlines the form of claim for refund and limitation. It states that every claim for a tax refund must be made by filing a regular return of income as specified under Section 263.

 

The petitioner has sought directions to the government to immediately process and credit the unclaimed tax deducted at source refunds, specifically targeting those with tax deducted at source credits up to INR 5,000 per annum, along with applicable statutory interest, directly into the linked bank accounts of individual PAN holders for each of the past three assessment years, without insisting on the filing of income tax returns. The petitioner sought the government to forthwith implement a permanent automatic TDS refund mechanism for current and future assessment years, whereby individuals whose total income is below the basic exemption limit, specifically targeting those with tax deducted at source credits up to INR 5,000 per annum, are automatically identified and credited their tax deducted at source refunds without insistence on return filing.

 

Currently, the government retains tax deducted at source from nearly 20 million citizens, primarily senior citizens and low-income earners, whose total annual income falls below the taxable threshold, said the petitioner. 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 government possesses no legal authority to hold these sums once the absence of a tax debt is established, said the petitioner. In a regime governed by the rule of law, every rupee withheld beyond the scope of a legal levy is an unauthorised expropriation that the state has a fiduciary and constitutional duty to return, stated the petition.

 

By mandating a complex, digital-only compliance process as a prerequisite for refunds, Section 433 forces individuals who are not otherwise legally required to file a return into a costly administrative quagmire, said the petitioner. This framework runs directly counter to the state's 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, said the petitioner. Consequently, Section 433 operates as a mechanism for the de facto forfeiture of private property, effectively extinguishing the substantive Right to Property under Article 300A through an unreasonable procedural hurdle, the petitioner said.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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