Indian Government Retracts Income Tax Bill 2025 For Revision With Stakeholder Feedback

The government has decided to retract the Income-Tax Bill, 2025, which was initially presented in the Lok Sabha on February 13. This bill aimed to replace the long-standing Income-Tax Act of 1961. According to ET revised version of this bill will be introduced on August 11, incorporating recommendations from the Select Committee led by Shri Baijayant Panda.

To ensure clarity and avoid confusion from multiple versions, the updated Income Tax Bill will be presented for consideration on August 11. The new draft is expected to include most of the suggestions made by the committee, providing a comprehensive and updated framework for India's direct tax laws.

Key Features of the Withdrawn Bill

The withdrawn Income-Tax Bill, 2025, was introduced by Finance Minister Nirmala Sitharaman in February. It was considered a major overhaul of India's direct tax legislation, aiming to replace the existing 298-section Income-Tax Act with a more modern and user-friendly law. The proposed law was about half the length of its predecessor.

This draft suggested several changes: simplifying legal language by reducing provisos and explanations, consolidating similar deductions for easier compliance, and introducing lower penalties for certain offences to make the system more taxpayer-friendly. Importantly, it did not propose any new taxes; existing tax slabs and rules would remain unchanged.

Modernising Tax Administration

The bill also aimed at reducing litigation through a "trust first, scrutinise later" approach and removing over 300 outdated provisions. It sought to modernise administration by granting greater powers to the Central Board of Direct Taxes (CBDT) to set rules and implement digital monitoring systems. Additionally, it introduced the concept of a "tax year" to reduce confusion between financial and assessment years.

The structure of this bill was more detailed than the 1961 Act. It comprised 23 chapters, 536 sections, and 16 schedules. Tables and formulas were used extensively to simplify interpretation. The bill also focused on streamlining TDS provisions and simplifying depreciation rules while retaining residency laws and financial year timelines.

The introduction of this revised bill is anticipated with interest as it promises significant changes in how direct taxes are administered in India. By incorporating feedback from various stakeholders, it aims to create a more efficient tax system that benefits both taxpayers and administrators alike.