Centre Withdraws Income Tax Bill 2025 — Updated Version To Be Introduced On August 11

The Union Government has withdrawn the Income Tax Bill, 2025, which was first introduced in the Lok Sabha on February 13 to replace the six-decade-old Income-Tax Act, 1961. Finance Minister Nirmala Sitharaman announced that a revised version — incorporating recommendations from the Select Committee chaired by Baijayant Panda — will be tabled in Parliament on Monday, August 11.

Why the Bill Was Withdrawn

To avoid confusion caused by multiple drafts and to provide a single, consolidated text reflecting all committee and stakeholder inputs, the government chose to withdraw the earlier Bill. The 31-member Select Committee submitted its recommendations on July 21, and the revised draft incorporates most of the 285 suggestions aimed at clearer drafting and improved alignment of provisions.

Key Focus Areas of the Revised Bill

• Language simplification: Remove complex drafting and redundant clauses for easier interpretation.
• Refund rules: Allow taxpayers to claim TDS or income-tax refunds even if ITRs are filed after the due date, without penal charges in certain cases.
• Anonymous donations: Preserve tax exemptions for anonymous donations to purely religious trusts while clarifying taxability for mixed-purpose trusts (those running hospitals or schools).
• Streamlining procedures: Align cross-references, fix drafting inconsistencies and update consequential provisions.

What the Select Committee Recommended

The Committee recommended broad changes covering drafting clarity, taxpayer protections and operational fixes. Key suggestions included restoring certain deductions and exemptions that were unintentionally omitted, easing refund procedures, and ensuring the new law is implementable without creating undue hardship for taxpayers.

Government Timeline and Implementation

The government has indicated that, following Parliament’s consideration, the new Income Tax law is targeted for implementation from April 1, 2026. The revised Bill aims to replace the Income-Tax Act, 1961 after updating language, removing obsolete provisions and modernising compliance processes.

What Taxpayers Should Watch For

• Precise wording on refund eligibility and whether transitional safeguards are provided for late filers.
• Clarification on anonymous donations and treatment of mixed-purpose trusts.
• Any substantive changes to tax rates or capital gains provisions (officials say language, not rates, is the focus).
• Operational details about the proposed digital-first, automated and faceless processes.

Final Note

With the revised Bill scheduled for August 11, stakeholders will closely review the text for both technical changes and practical implications. The government’s stated goal is to produce a single, coherent statute that simplifies compliance and reduces disputes — but the exact impact will become clear only after the Bill is tabled and scrutinised in Parliament.