Government Withdraws Income-Tax Bill, 2025; Revised Version to be Introduced on August 11

New Delhi, August 8, 2025 — The Central Government on Friday formally withdrew the Income-Tax Bill, 2025 from the Lok Sabha, paving the way for a revised draft that will incorporate extensive recommendations from the Parliamentary Select Committee. The motion for withdrawal, moved by Finance Minister Nirmala Sitharaman, was passed by the House despite uproar from Opposition members.

The decision follows a comprehensive review of the Bill by a 31-member Select Committee chaired by BJP MP Baijayant Panda. The panel had presented its findings on July 21, the opening day of the Monsoon session. Over several weeks of deliberations and consultations with stakeholders, the committee scrutinised each provision of the draft law and compiled an exhaustive 4,584-page report containing 566 recommendations.

Government officials confirmed that a fresh, updated version of the Bill reflecting most of these recommendations will be tabled in the Lok Sabha on Monday, August 11. “This approach avoids confusion by replacing the earlier draft entirely, ensuring that Parliament debates a single, consolidated version with all agreed changes included,” a senior source explained.

Among the committee’s major suggestions is the amendment of provisions that currently deny tax refunds if returns are filed after the due date. It also recommended aligning the definition of micro and small enterprises with the MSME Act to remove discrepancies, and sought greater clarity for non-profit organisations on issues such as the distinction between ‘income’ and ‘receipts’, handling of anonymous donations, and removal of the deemed application concept to avoid potential legal disputes.

Technical adjustments were also proposed covering advance ruling fees, TDS on provident funds, the issuance of low-tax certificates, and rationalisation of penalty powers to cut down on unnecessary litigation.

Originally introduced on February 13, 2025, the Income-Tax Bill seeks to replace the six-decade-old Income-tax Act of 1961. It was conceived as part of the July 2024 Union Budget’s commitment to simplifying tax laws, modernising their language, and reducing disputes.

The reintroduction of the revised Bill on August 11 is expected to spark intense parliamentary debate, marking a critical step in one of India’s most ambitious tax reforms in recent years.