Centre withdraws Income Tax Bill 2025, revised version to be tabled on August 11

The Income-Tax Bill 2025, which was first introduced in Lok Sabha on February 13 has been formally withdrawn by the Centre. However, a revised version, incorporating most of the recommendations of the Select Committee chaired by Baijayant Panda, will reportedly be introduced on August 11.

To avoid confusion by multiple versions of the Bill and also to provide a clear and updated version with all changes incorporated, the revised Income Tax Bill will be tabled for the consideration of the House on Monday.

Earlier, the committee had submitted its report to Parliament on July 21 and it included 4,500 pages and 285 suggestions to improve the draft New Income Tax Bill, 2025, which is meant to replace the old 1961 Act. Among the many proposals, a few stand out that could directly benefit ordinary taxpayers.

 Why was the Income Tax Bill 2025 withdrawn?

• On why the Income Tax Bill was withdrawn in Parliament, Finance Minister Nirmala Sitharaman said that suggestions have been received which are required to be incorporated to convey the correct legislative meaning. Moreover, she said there are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing.
• Sitharaman stated that the government has withdrawn the Income-Tax Bill, 2025 and that a fresh Bill will be introduced in the Lok Sabha “in due course” to replace the Income-Tax Act, 1961.
• It was also withdrawn as in the old version of the bill, several drafting errors had been spotted by lawyers and chartered accountants, with the Lok Sabha Select Committee flagging some of them.

New Income Tax Bill 2025: What are the changes it offers

• The Income-Tax Bill 2025 — that was tabled in Parliament by Finance Minister Nirmala Sitharaman in February — was billed as the most significant overhaul of India’s direct tax law in more than 60 years. The new bill aimed to replace the 298-section Income-Tax Act, 1961 with a modern, taxpayer-friendly law written in simpler language, about 50% shorter than the current statute.
• In the Income Tax Bill bill, the Select Committee suggested two important changes for citizens earning income from their house properties.
• First, the 30% standard deduction, which is already allowed after municipal tax deductions, should be clearly mentioned in the revised Income Tax Bill law.
• Moreover, the benefit of home loan interest deductions, which are now available only for self-occupied properties, should also be extended to rented properties.
• These suggestions will make it easier for middle-class homeowners and those investing in property for rental income.
• Several taxpayers face long delays to get refunds for TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). In this regard, the committee wants the refund process to be quicker, easier, and more transparent.
• The CBDT (Central Board of Direct Taxes) earlier said that new rules are being drafted under a policy called “Enforcement with Empathy,” aiming to reduce hassles for honest taxpayers.