Delhi High Court seeks Centre’s reply on PIL seeking automatic TDS refunds for non-taxable individuals

The Delhi High Court on Wednesday issued notice to the Central government on a plea seeking directions to automatically refund Tax Deducted at Source (TDS) to individuals who have no tax liability and are not otherwise required to file Income Tax Returns (ITR) except to claim the refund.

A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia asked the government to file its response to the public interest litigation (PIL) petition.

The Court said the case will be heard on November 6.

The issue affects individuals who are subject to TDS but later fall outside the bracket when various exemptions are claimed thereby making them liable for refund of TDS already cut by the employer.

Such persons currently have to file ITR to be eligible to claim such refund.

The petitioner, Aakash Goel, moved the Court seeking a reading down of Section 433 of the Income Tax Act, 2025, which requires individuals to file an Income Tax Return (ITR) to claim a refund.

Goel also sought immediate refund of unclaimed TDS up to ₹5,000, with interest, for assessment years 2023-24 to 2025-26 without ITR filing or fresh verification. He also said there should be a permanent automatic refund mechanism for non-taxable individuals.

In his petition, Goel claimed that around 2.35 crore individuals had TDS credits but did not file returns for assessment year 2023-24 despite their eligibility to claim refund. He relied on government data to claim that around 8.59 crore individuals had TDS of ₹5,000 or less during financial year 2023-24, with approximately 7.51 crore having TDS of ₹1,000 or less.

“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,” the plea said. 

The petitioner argued that requiring low-income earners, senior citizens, daily wage workers and other vulnerable individuals to undergo the ITR filing process to recover small amounts is burdensome and, in some cases, economically irrational.

"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 petition stated.