Lok Sabha passes revised Income Tax Bill, 2025: Key amendments welcomed by experts

The Lok Sabha today passed the Income Tax (No. 2) Bill, 2025, and the Taxation Laws (Amendment) Bill, marking a major overhaul of the tax regime. The former seeks to replace the Income Tax Act of 1961, while the latter grants tax exemptions to subscribers of the Unified Pension Scheme.

Both bills were passed by voice vote without debate, amid strong opposition protests. Finance Minister Nirmala Sitharaman reintroduced the revised Income Tax Bill earlier in the day, following its withdrawal to incorporate recommendations from the Select Committee.

"The bill seeks to consolidate and amend the law relating to income-tax and will replace the Income Tax Act, 1961," said Sitharaman, while tabling the revised draft.

The government said “almost all” recommendations from the Select Committee have been accepted, along with additional suggestions from stakeholders. These changes include drafting corrections, alignment of phrases, and clarification of legal provisions.

Gouri Puri, Partner at Shardul Amarchand Mangaldas, said the revision shows responsiveness to feedback: “The revised bill addresses these gaps to simplify interpretation, reduce disputes, and promote fairness.”

Dinesh Kanabar, CEO, Dhruva Advisors, welcomed the amendments: “There were a number of provisions against which representations were made… these have now been accepted in the Bill presented today.”

Key improvements include the removal of Alternate Minimum Tax on LLPs, relief to charitable trusts, and clearer rules on transfer pricing and associated enterprises.

Commenting on pension-related provisions, Rajesh Gandhi of Deloitte noted they remain broadly similar to current laws but suggested the government “could have considered industry suggestions including extension of tax benefits to holding companies setup prior to 2021.”

The passage of the revised bill is expected to improve compliance, reduce litigation, and enhance taxpayer confidence across sectors.