Automatic TDS refunds without mandatory ITR filing? Delhi HC seeks Centre’s response on PIL
The Delhi High Court on Wednesday sought the central government’s response to a public interest litigation (PIL) that seeks automatic refunds of tax deducted at source (TDS) for individuals who do no have any tax liability and are not otherwise required to file income tax return (ITR).
The petition challenges Section 433 of the Income-tax Act, 2025, which currently requires a person to file an ITR in order to claim a tax refund. It argues that those who do not owe any tax should not have to go through the return-filing process solely to recover TDS that has already been deducted from their income.
A Division Bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia issued notice on the petition filed by Aakash Goel and granted time to the Centre to submit its reply, according to a PTI report.
The matter has been listed for further hearing on November 6, 2026.
Petition seeks automatic TDS refund system
According to the petition, the issue impacts many taxpayers whose final taxable income falls below the exemption limit after accounting for deductions, exemptions and other such benefits, as employers and banks still deduct TDS during the each financial year.
As a result, even though such employees do no have any tax liability or the requirement to file an ITR, they have to do it solely to obtain a refund of the tax that has already been deducted.
The petitioner has urged the High Court to read down Section 433 to the extent that it mandates ITR filing for refund claims by persons who are otherwise exempt from filing returns.
He has also 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 such taxpayers, thereby reducing unnecessary compliance burdens and provide timely relief to eligible taxpayers by a refund.
‘System affects senior citizens…’
The petition further contends that the existing system places an unfair burden on senior citizens, blue-collar workers and other low-income individuals, many of whom may not have the resources, awareness or the technical ability to file tax returns merely to claim relatively small refund amounts.
It also states that the government already has access to the necessary information through PAN, Aadhaar, Form 26AS and TDS records and therefore eligible refunds could be processed automatically without requiring taxpayers to file a separate ITR solely for that purpose.
Citing official income tax department statistics, the petition claims that around 2.35 crore people had TDS credits but did not file ITRs, despite many of them having no tax liability. It argues that the mandatory return filing requirement effectively prevents many eligible taxpayers from recovering money that rightfully belongs to them.
The petition further says that while the tax department has developed advanced technology to detect tax evasion and track non-filers, a similar technology-driven mechanism has not been adopted for automatically returning excess TDS to individuals who owe no tax.
It contends that the continued retention of such amounts, despite the absence of any tax liability, is arbitrary and unconstitutional.
The PIL also refers to the Parliamentary Select Committee’s recommendation on the Income Tax Bill, 2025, which had suggested removing the mandatory return-filing requirement for claiming refunds, describing it as burdensome for small taxpayers. According to the petitioner, the recommendation was not incorporated in the final legislation.
(With inputs from PTI)
