In a decisive move, the Indian government has formally withdrawn the Income-Tax Bill, 2025—originally introduced on February 13 in the Lok Sabha as a substitute for the long-standing Income-Tax Act of 1961. The withdrawal, announced on August 8, 2025, paves the way for a substantially redrafted bill that integrates key suggestions from the Select Committee, chaired by MP Baijayant Panda, and is scheduled for reintroduction in Parliament on August 11. The Economic TimesIndia BriefingIndiatimes
Why Was the Bill Withdrawn?
Officials say the withdrawal decision emerged in response to extensive feedback received from the 31-member Select Committee. Notable concerns included drafting inconsistencies, ambiguous phrasing, cross-referencing errors, and language clarity—particularly concerning clauses related to house property income, standard deductions, and salary deductions.
Finance Minister Nirmala Sitharaman noted that instead of presenting piecemeal amendments, it was more prudent to withdraw the bill and table a consolidated, streamlined version that fully incorporates the committee’s improvements. India BriefingThe Indian Express
Key Features of the Revised Bill
The upcoming version of the bill aims to strike a balance between modernization and continuity:
- Simplified language and structure: The revised draft promises clearer text, tables, and formulas to make tax laws more accessible, particularly for ordinary taxpayers, small businesses, and MSMEs.
- Maintaining core tax architecture: While the language is being simplified, the bill largely preserves the existing tax structure, with no immediate changes to tax rates or slabs.
- Select Committee improvements: Including clarity in deductions for house property (e.g., standard deduction after municipal taxes, extending home loan interest benefits to rented properties), simplified TDS refund rules, and protections for taxpayers against penalties for unintentional errors.
- Streamlined legislative process: By collapsing multiple versions into one cohesive draft, the government intends to reduce confusion and accelerate debate and approval in Parliament. The Economic TimesIndia BriefingThe New Indian ExpressIndiatimes
Broader Impact and Goals
The 1961 Income-Tax Act, while foundational, has become unwieldy, with over 4,000 amendments and more than half a million words, making compliance difficult. The 2025 Bill was envisioned as a long-overdue overhaul, folding in modern principles, digital readiness, and taxpayer empowerment. Its withdrawal and relaunch underline the government’s commitment to a robust but comprehensible tax regime. IndiatimesWikipediaThe Times of India
Experts and taxpayers anticipate that the revised iteration will:
- Reduce litigation and confusion by eliminating ambiguities,
- Boost taxpayer confidence through clearer rules and reduced penalties,
- Support MSMEs and middle-class taxpayers with a more navigable system,
- Lay a modern foundation for a direct tax regime, flexible and fair.
What’s Next?
On August 11, 2025, the revised bill is expected to be tabled in the Lok Sabha. The presentation will likely emphasize its enhanced clarity, consolidated form, and taxpayer-centric orientation. If passed, the bill could become a pivotal reform in India’s tax landscape, paving the way for enactment in time for the April 1, 2026 fiscal year—aligning with prior projections. India BriefingMoneycontrolWikipedia
A smooth rollout and positive legislative reception may mark this as one of India’s most significant advancements in direct taxation in decades.
