Income Tax Department reduces time to apply for Old Tax Refunds: Know More

The time period for claiming old income tax refunds has been reduced as an outcome of significant changes made by the Income Tax Department to its refund claim processes.

The current directives’ provisions give individuals and entities a significantly shorter window in which to submit their refund claims, which emphasizes the importance of submitting appropriate tax documents on time.

However, businesses now have a much shorter window in which to file their application; thus, the revised guidelines place a greater emphasis on prompt action and rigorous taxpayer compliance. However, under old procedures, applicants were given a considerable and fair amount of time to revise and submit their refund requests. However, the department plans to decrease the backlog of these outdated refund claims and restructure the tax administration.

Now, it is the taxpayers’ responsibility to retain all necessary records of future transactions and provide them to the tax authorities at the specified time; otherwise, they risk forfeiting the tax refund to which they are legally entitled.

The government’s commitment to increase operational efficiency, improve tax collection methods, and encourage timely tax payment is demonstrated by this policy reform. Taxpayers must be more proactive in order to maintain thorough records and adhere to filing deadlines due to the accelerated procedures. The increasing complexity of the regulatory environment also suggests that advanced tax record management and the use of tax advisory services are required.

All earlier instructions, circulars, and recommendations on the subject have been superseded by a new circular issued by the Central Board of Direct Taxes (CBDT) regarding the condonation of late filing of Income Tax Returns (ITRs). In accordance with Section 119(2)(b) of the Income-tax Act of 1961, the circular provides detailed guidance on handling late filing applications for refunds or loss carry forward.

It explains the guidelines that income-tax authorities must follow while handling these applications and the situations in which they can be pardoned for being late. Additionally, the CBDT has granted specific authority to various income-tax authorities based on the amount of the claims in order to ensure efficient processing.

Five years from the end of the financial year in which the ITR was due is the new date for requesting a delay condonation, according to the most recent circular. Taxpayers will therefore have one less year to obtain a delayed condonation. The circular was published by CBDT on October 1, 2024.

You can obtain a condonation from the tax authorities if you miss an ITR filing date. It can be used in two circumstances:

Late Electronic Verification: If you are unable to verify your ITR within 30 days of electronically filing, you may request a condonation, provided that you have a valid reason for the delay.

Late Filing of ITR: If you do not file your taxes by the annual deadline, usually July 31, you may get a pardon. A late fee, however, may be determined by the delay and your income. The tax department will take into account your explanations for the delay when deciding whether to approve the request.

Taxpayers must use the e-filing system to request a delayed condonation in order to receive this benefit. Income tax authorities have the last say on whether to approve such claims. The deadline for filing applications for a delay condonation was recently changed by the Central Board of Direct Taxes (CBDT). The most recent circular has lowered this limit to five years from the end of the financial year in which the ITR was due, whereas the previous 2015 circular permitted up to six years.

Taxpayers can greatly benefit from this method in situations like i. claiming unused refunds from previous years, or ii. carrying forward and deducting losses to lower future tax liabilities.

Court-related Income Tax Refund Claims

The five-year limit for refund claims resulting from a court order will not be calculated during the period the case was pending in court. It is necessary to submit the condonation application within six months of the court order date or the financial year’s end, whichever comes first.

Supplementary Income Tax Refund Claims

Late applications for supplementary refund claims (extra reimbursement after assessment) could be approved if other conditions are met. The income must not be taxable in another person’s name, and late refund claims will not be subject to interest. Self-assessment tax, advance tax, or excess tax withheld or collected at the source must be the cause of the refund.