Income Tax Bill 2025: What It Is, Why It Was Withdrawn and Everything You Should Know
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In a significant move, Union Finance Minister Nirmala Sitharaman on Friday withdrew the much-discussed Income Tax Bill, 2025, from the Lok Sabha. Far from shelving tax reform altogether, the government plans to reintroduce a revised version of the bill on August 11, incorporating several recommendations from the Parliamentary Select Committee . The aim is to make the legislation more practical, transparent, and aligned with India’s evolving economy.
What Was the Income Tax Bill 2025 ?
The proposed legislation was designed to replace the Income Tax Act of 1961 - a law that has shaped India’s direct taxation for over six decades. The new bill was pitched as a complete modernisation of the tax system, with goals such as:
Among the Select Committee’s notable suggestions were two key changes for homeowners:
Why Was It Withdrawn?
The withdrawal was not a retreat but a pause for refinement. The bill underwent extensive scrutiny by the Select Committee, which consulted experts, industry representatives, and policymakers. Their feedback highlighted areas where the draft could be improved for clarity and fairness.
A Long History of Amendments
The Income Tax Act, 1961, has been active since April 1, 1962. Over the years, it has undergone 65 amendments and more than 4,000 tweaks, reflecting the evolving economic and legislative landscape. The new bill aims to end this patchwork approach by introducing a more coherent, future-ready tax code.
The upcoming August 11 session will be crucial as the government unveils the updated version of the Income Tax Bill, 2025 - one that promises clarity, modernisation, and greater fairness in India’s tax system.
Sitharaman acknowledged that many of these recommendations were essential. Rather than push through a half-baked law, the government opted to withdraw the bill and return with a more polished version that better reflects the committee’s inputs.
Key Recommendations from the Committee
1. Tax Refund Flexibility
2. Inter-Corporate Dividends
3. Nil TDS Certificate
Importantly, the Income Tax Department clarified that the bill does not propose changes to capital gains tax rates. Its primary purpose is to simplify language and remove outdated provisions - not alter tax slabs.
A Long History of Amendments
The Income Tax Act, 1961, has been active since April 1, 1962. Over the years, it has undergone 65 amendments and more than 4,000 tweaks, reflecting the evolving economic and legislative landscape. The new bill aims to end this patchwork approach by introducing a more coherent, future-ready tax code.
The upcoming August 11 session will be crucial as the government unveils the updated version of the Income Tax Bill, 2025 - one that promises clarity, modernisation, and greater fairness in India’s tax system.
What Was the Income Tax Bill 2025 ?
The proposed legislation was designed to replace the Income Tax Act of 1961 - a law that has shaped India’s direct taxation for over six decades. The new bill was pitched as a complete modernisation of the tax system, with goals such as:- Aligning Indian tax laws with global best practices
- Simplifying compliance for taxpayers
- Reducing litigation by closing legal loopholes
- Addressing taxation in the digital economy, including cryptocurrencies and cross-border digital income
Among the Select Committee’s notable suggestions were two key changes for homeowners:
- Explicitly stating the 30% standard deduction after municipal tax deductions
- Extending home loan interest benefits to rented properties, not just self-occupied homes
Why Was It Withdrawn?
The withdrawal was not a retreat but a pause for refinement. The bill underwent extensive scrutiny by the Select Committee, which consulted experts, industry representatives, and policymakers. Their feedback highlighted areas where the draft could be improved for clarity and fairness.A Long History of Amendments
The Income Tax Act, 1961, has been active since April 1, 1962. Over the years, it has undergone 65 amendments and more than 4,000 tweaks, reflecting the evolving economic and legislative landscape. The new bill aims to end this patchwork approach by introducing a more coherent, future-ready tax code. The upcoming August 11 session will be crucial as the government unveils the updated version of the Income Tax Bill, 2025 - one that promises clarity, modernisation, and greater fairness in India’s tax system.
Sitharaman acknowledged that many of these recommendations were essential. Rather than push through a half-baked law, the government opted to withdraw the bill and return with a more polished version that better reflects the committee’s inputs.
Key Recommendations from the Committee
1. Tax Refund Flexibility
- Remove the rule barring refunds if the Income Tax Return (ITR) is filed after the due date.
- Allow refunds to be claimed as long as they are part of the filed return.
2. Inter-Corporate Dividends
- Reinstate the Section 80M deduction for companies benefiting from the special tax rate under Section 115BAA, which was missed in the original draft.
3. Nil TDS Certificate
- Permit taxpayers to obtain a Nil TDS (Tax Deducted at Source) certificate, helping reduce unnecessary tax deductions.
Importantly, the Income Tax Department clarified that the bill does not propose changes to capital gains tax rates. Its primary purpose is to simplify language and remove outdated provisions - not alter tax slabs.
A Long History of Amendments
The Income Tax Act, 1961, has been active since April 1, 1962. Over the years, it has undergone 65 amendments and more than 4,000 tweaks, reflecting the evolving economic and legislative landscape. The new bill aims to end this patchwork approach by introducing a more coherent, future-ready tax code. The upcoming August 11 session will be crucial as the government unveils the updated version of the Income Tax Bill, 2025 - one that promises clarity, modernisation, and greater fairness in India’s tax system.
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