Income Tax Bill withdrawn, new version with key tweaks to be tabled on August 11

The Centre has withdrawn the Income-Tax Bill, 2025, just months after its introduction in Parliament, and will table a new, revised version on Monday, August 11, incorporating key changes recommended by a Select Committee led by Baijayant Panda, sources told Business Today.

The original Bill, introduced on February 13, aimed to overhaul the Income Tax Act, 1961, by cutting legal clutter. But with numerous amendments arising from committee reviews, the government decided to withdraw the first draft to avoid confusion and present a consolidated version for debate.

The new version retains the simplification intent but adds clarity to ensure no ambiguity arises, sources said. A core goal is to reduce interpretation disputes and align scattered tax provisions under a more coherent structure.

During deliberations, the finance ministry argued that the language merely clarified existing powers, already supported by court rulings and department circulars. The committee accepted the provision with some tweaks, concluding it doesn’t introduce new legal powers but restates current law in clearer terms.

What was proposed before

The withdrawn draft had proposed several reforms aimed at simplifying and modernising India’s direct tax laws.

Key features included:

• Simplified legal language: Shorter, clearer provisions with fewer provisos and explanations, plus consolidation of similar deductions to ease compliance.
• Lower penalties for select offences: A move to make the regime more taxpayer-friendly.
• No change in tax rates or categories: Existing slabs, capital gains rules, deadlines, and income classifications would remain intact.
• Reduced litigation: Adoption of a “trust first, scrutinise later” approach and removal of over 300 outdated provisions.
• Modern administration: Enhanced powers for the CBDT to frame rules, deploy digital monitoring, and introduce a “tax year” concept to reduce confusion between financial and assessment years.
• The proposed bill was more structured than the Income-tax Act, 1961 — spread across 23 chapters, 536 sections, and 16 schedules — and used tables and formulas to make interpretation simpler.