Income Tax Bill: Government withdraws Income Tax Bill, updated version will come on August 11..

The Government of India has withdrawn the Income Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 to replace the six-decade-old Income Tax Act, 1961. A new version of the Income Tax Bill, incorporating most of the recommendations made by the Select Committee headed by Shri Baijayant Panda, will be introduced on Monday, August 11. To avoid confusion due to various versions of the Bill and to provide a clear and updated version incorporating all the changes, a new version of the Income Tax Bill, 2025, will be introduced in the House on August 11 for consideration.

Why the Income Tax Bill, 2025, was withdrawn

Sharing the reasons for its withdrawal in Parliament, Finance Minister Nirmala Sitharaman said that suggestions have been received that need to be incorporated to convey the correct legislative meaning. Improvements have been made in drafting, alignment of phrases, some changes, and cross-referencing. He further said that, therefore, the government has withdrawn the Income Tax Bill, 2025, and a new bill to replace the Income Tax Act, 1961, will be introduced in the Lok Sabha "in due course". In the earlier version of the bill, lawyers and chartered accountants had noticed several drafting errors, some of which were also pointed out by the Select Committee of the Lok Sabha.

What were the changes in the IT Bill 2025?

The Income Tax Bill, 2025, introduced in Parliament by Finance Minister Nirmala Sitharaman in February, was described as the most significant change in India's direct tax in more than 60 years. It aimed to replace the 298-section Income Tax Act, 1961, with a modern, taxpayer-friendly law, written in simple language and about 50 per cent shorter than the current law.

These were the proposals.

Easier legal language: shorter provisions, fewer provisions and explanations, and integration of similar deductions to ease compliance.

Lower penalties for certain offences: Designed to make the law more taxpayer-friendly.

No new taxes: No changes to tax slabs, capital gains rules, deadlines, and income categories.

Less litigation: “Trust first, investigate later” approach, as well as removal of over 300 archaic provisions.

Modern administration: More powers to CBDT to set rules, a digital monitoring system introduced, and the “tax year” concept introduced to reduce confusion between the financial year and assessment year.

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