Expect an income tax refund rush before new law dawns

Ahead of the implementation of the new income tax (IT) law cleared by Parliament, the government plans to release a slew of pending tax refunds in the current financial year, including cases dating back up to a decade, according to a senior government official.

- MONIKA YADAV

These refunds, reckoned to be close to ₹1,000 crore, largely relate to tax demand cases in which taxpayers had secured favourable orders from appellate authorities but the refunds had not been issued due to systemic issues.

The exercise is part of a pre-migration clean-up in the IT department to ensure that legacy refund cases are settled before the Income Tax Act of 2025 replaces its 64-year-old predecessor and back-end systems aligned with it take effect from April 1, 2026.

"There are new sections in the Bill, and the systems have to be aligned accordingly. We want to clear these pending refunds so that no issues arise once the new Act takes effect," the official said. "If old refund cases linger, they could get entangled in the new processes. By settling these now, we ensure that the transition to the new act is seamless and free of legacy baggage," he elaborated.