Revised Income Tax Bill 2025: Key Changes and Why the Earlier Bill Was Withdrawn

The Revised Income Tax Bill 2025 marks a significant shift in India’s tax legislation. Originally introduced in the Lok Sabha on February 13, 2025, the earlier bill aimed to replace the Income-Tax Act, 1961. However, following the Parliamentary Select Committee’s 285 recommendations and further inputs from stakeholders, the government decided to withdraw the initial draft. The updated version is set to be tabled on August 11, 2025.

Why Was the Earlier Income Tax Bill Withdrawn?

The earlier bill faced criticism for certain provisions that were considered restrictive and unclear. The Select Committee’s report, submitted on July 21, highlighted the need for simplified language, removal of redundant clauses, and better alignment of tax provisions. The revised bill addresses these concerns, focusing on transparency and ease of compliance for taxpayers.

Key Changes in the Revised Income Tax Bill 2025

Refund Eligibility Restored: The controversial clause (Section 433) denying refunds for late-filed ITRs has been removed. Taxpayers can now claim refunds even if returns are filed after the due date.
Section 80M Deduction Restored: Companies availing special tax rates under Section 115BAA will once again benefit from the inter-corporate dividend deduction.
Nil TDS Certificate Provision: Taxpayers will be able to obtain a Nil TDS certificate under specified conditions, avoiding unnecessary tax deductions.
Anonymous Donations Exemption: Purely religious trusts will be exempt from tax on anonymous donations, but the exemption will not apply to trusts engaged in both religious and social services.
Digital-First Tax System: The bill promotes a fully digital, automated, and faceless tax process to enhance convenience and reduce corruption.
No Change in Capital Gains Tax Rates: Despite rumors, the Income Tax Department has confirmed that the bill focuses on language simplification, not tax rate changes.

Expert Opinion

According to Vivek Jalan, Partner at Tax Connect Advisory Services LLP, removing the refund restriction clause avoids unnecessary litigation and taxpayer hardship. He noted that many taxpayers miss filing deadlines due to genuine reasons, and this change will prevent financial losses.

Impact and Expectations

The Income-Tax Act, 1961 has been amended over 4,000 times since its inception. The Revised Income Tax Bill 2025 aims to replace it entirely, offering a cleaner, more streamlined legal framework. This reform could simplify compliance, improve efficiency, and make the Indian tax system more taxpayer-friendly.

What’s Next?

All eyes are on August 11, 2025, when the revised bill will be officially presented in Parliament. If passed, it will mark the end of a six-decade-old tax law and the beginning of a new era in India’s fiscal policy.