Income Tax Bill, 2025 withdrawn:
Why govt pulled back original proposal & what are Parl panel's suggestions
Aug 8, 2025
Synopsis
The Income-Tax Bill, 2025, intended to modernize India's tax system, has been withdrawn following recommendations from a Parliamentary Select Committee. A revised version, incorporating suggestions including changes to beneficial ownership, dividend deductions, and compliance ease for taxpayers, will be introduced soon. The aim is to present a consolidated draft addressing concerns and preventing confusion.
The government on Friday formally withdrew the Income-Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 this year to replace the existing Income-Tax Act, 1961.
A revised draft, incorporating most of the 285 suggestions made by the Parliamentary Select Committee chaired by BJP MP Baijayant Panda, will be introduced on Monday, August 11.
Why the earlier proposed Bill was withdrawn
The Income-Tax Bill, 2025 was envisioned to simplify and modernise India’s tax framework, replacing the over six-decade-old law. It proposed a streamlined structure, changes to tax slabs, digital tax provisions, dispute resolution mechanisms, and efforts to widen the tax base using data and tech tools.
However, the draft drew feedback from the parliamentary committee prompting certain changes.
As per officials, the withdrawal aims to prevent confusion arising from multiple versions and to present a consolidated draft with all accepted amendments.
What the committee recommended
The 31-member Parliamentary Select Committee submitted a detailed 4,575-page report last month, recommending both minor corrections and 32 major changes.
The key changes suggested include:
The panel has proposed a change in the definition of "beneficial owner" to allow individuals who derive direct or indirect benefit from shares during the tax year to carry forward losses.
Recommendations include restoring the deduction for inter-corporate dividends, which was missing in the original draft. A standard 30% deduction is also proposed, to be applied after subtracting municipal taxes, and pre-construction interest deductions could now be extended to let-out properties.
To ease the compliance burden for individual taxpayers, the report suggests:
Issuing 'Nil' tax deduction certificates
Allowing discretionary waiver of penalties for non-deliberate non-compliance
Enabling refunds in late ITR filings for small taxpayers
The panel has also sought more clarity on the definition of non-performing assets (NPAs) to reduce long-standing disputes in tax and banking interpretations.
Clarity for corporates and charitable trusts
The report has proposed clearer definitions of “parent company” and sought proper provisions for non-profits and religious-cum-charitable trusts. The committee recommends that anonymous donations should not disqualify them from tax exemptions.
It also called for the removal of residual references to the Income-Tax Act, 1961, to ensure the new code is self-contained and litigation-resistant.
[The Economic Times]
