The central government on Friday officially withdrew the Income-Tax Bill, 2025, which had been introduced in the Lok Sabha on February 13 to replace the current Income-Tax Act, 1961. A revised version of the Bill, incorporating key recommendations from a Parliamentary Select Committee, will be presented on Monday, August 11.
Why Was the Original Bill Withdrawn?
The proposed Income-Tax Bill, 2025 aimed to overhaul India’s outdated tax system with a simpler, tech-driven framework. It included changes in tax slabs, digital tax measures, streamlined dispute resolution, and a broader tax base using data analytics.
However, following extensive feedback from a 31-member committee led by BJP MP Baijayant Panda, the government chose to withdraw the initial draft to avoid confusion and introduce a consolidated version with amendments already factored in.
What Did the Parliamentary Committee Recommend?
The committee submitted a detailed 4,575-page report, suggesting 285 changes, including 32 major revisions. Key recommendations include:
1. Revised Definition of Beneficial Owner
- Individuals gaining direct or indirect benefit from shares during a financial year may now be allowed to carry forward losses.
2. Relief for Individual Taxpayers
- Introduction of ‘Nil’ tax deduction certificates
- Discretionary waivers for penalties in non-deliberate compliance failures
- Allowing refunds in late ITR filings for small taxpayers
3. Home Loan Interest and Rental Income
- Deduction to be calculated after subtracting municipal taxes
- Pre-construction interest deduction to be extended to let-out properties
4. Clarification on NPAs
- A clearer definition of non-performing assets (NPAs) to help reduce tax and banking-related disputes
5. Corporate & Non-Profit Clarity
- Refined definitions of “parent company”
- Safeguards for religious and charitable trusts — anonymous donations will not automatically disqualify them from tax exemptions
6. Legal Streamlining
- Removal of all residual references to the Income-Tax Act, 1961, ensuring the new legislation is self-contained and litigation-resistant
What’s Next?
The updated Income-Tax Bill will be tabled in Parliament on August 11, reflecting most of the panel’s suggestions. The government is aiming for a modern tax code that is simpler, fairer, and more transparent, with reduced compliance burden and fewer legal disputes.
