Three days after withdrawing its earlier proposal, the government on Monday reintroduced an overhauled Income Tax Bill in the Lok Sabha, aimed at streamlining and modernising India’s direct tax framework.
Titled The Income-Tax (No. 2) Bill, 2025, the legislation was tabled by Finance Minister Nirmala Sitharaman to consolidate and amend laws relating to income tax. It comes after the BJP MP Baijayant Panda-led 31-member Select Committee suggested a series of modifications following detailed consultations with stakeholders.
The earlier version of the Bill was withdrawn last week amid raucous protests by Opposition members. On July 21, the panel’s report on the proposed law was presented in the Lower House, identifying key areas requiring tightening of definitions, removal of ambiguities, and better alignment with existing legal frameworks.
The Committee, in a voluminous 4,584-page report, made 566 recommendations, including several drafting corrections. Among its taxpayer-friendly proposals was the deletion of a contentious clause that disallowed refunds when income tax returns were filed beyond the prescribed due date.
Also read: FM Sitharaman to table revised Income Tax Bill 2025
It also recommended that the definition of micro and small enterprises be brought in line with the MSME Act, while for non-profit organisations, it sought clarity on the terms ‘income’ and ‘receipts’, the treatment of anonymous donations, and the elimination of the “deemed application” provision to avoid legal disputes.
Further, the panel called for amendments to clarify provisions related to advance ruling fees, tax deduction at source on provident funds, the issuance of low-tax certificates, and the scope of penalty powers.
The revamp stems from the government’s July 2024 Budget announcement of a comprehensive review of the Income-tax Act, 1961, a law in force for over six decades. The objective, as stated then, was to make the statute concise, lucid, and less prone to litigation, while ensuring it meets the needs of a modern economy.
The first version of the new Income Tax Bill was introduced on February 13, 2025, but its withdrawal last week paved the way for the current draft, which incorporates the Committee’s extensive recommendations. The Bill will now be examined and debated in the House before being put to a vote.
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