After extensive review by a Parliamentary Select Committee, the government has withdrawn the original Income Tax Bill, 2025, and plans to reintroduce a revised version on August 11. The committee, led by BJP MP Baijayant Panda, submitted a comprehensive report with 285 recommendations aimed at simplifying and modernizing India’s direct tax legislation.
The original bill, introduced on February 13, was intended to replace the Income Tax Act of 1961. However, the committee’s report, presented on July 21, highlighted numerous areas for improvement. Among the key changes proposed by the committee were:
- Tax Refunds: The committee recommended allowing taxpayers to claim refunds even if their returns are filed after the due date, a departure from the original bill’s provision.
- Dividends and Deductions: It proposed including the Section 80M deduction for inter-corporate dividends under the special rate benefits of Section 115BAA.
- TDS Certificates: The committee suggested that taxpayers should be able to obtain NIL TDS certificates.
- Clarification on Tax Rates: The report explicitly stated that no changes to tax rates, including Long-Term Capital Gains (LTCG), were recommended, correcting earlier media reports.
- Micro and Small Enterprises: The committee proposed aligning the definitions of these enterprises with those already established in the MSME Act.
- Improved Clarity: The report also focused on tightening definitions, correcting drafting errors, and providing clearer rules on advance ruling fees, TDS on provident funds, and penalty provisions.
The government’s decision to withdraw and revise the bill shows its commitment to creating a more refined and taxpayer-friendly tax code that incorporates feedback from parliamentarians and stakeholders. The new bill, expected to be introduced on August 11, will reflect these significant changes.