The Lok Sabha on Monday passed the Income Tax (No. 2) Bill, 2025, replacing the six-decade-old Income-tax Act of 1961, without holding any debate, even as opposition protests over the Special Intensive Revision of electoral rolls in Bihar continued to disrupt proceedings.
Introduced just hours earlier by Finance Minister Nirmala Sitharaman, the legislation incorporates almost all of the 566 recommendations made by the Baijayant Panda-headed 31-member Select Committee, which examined the Bill. The move follows the government’s decision last week to withdraw the earlier Income Tax Bill, 2025, tabled in February, in favour of a revised draft reflecting stakeholder feedback and committee suggestions.
The government had announced in the July 2024 Budget its intention to conduct a time-bound and comprehensive review of the 1961 Act to make it more concise, lucid, and easier to interpret, aiming to reduce taxpayer disputes and improve administrative efficiency. Over the decades, the law has undergone multiple amendments, rendering its language complex and its structure burdensome for both taxpayers and administrators.
Also read: Govt withdraws IT Bill, to table new version on Aug 11
The Select Committee’s exhaustive 4,584-page report recommended tightening definitions, eliminating ambiguities, and ensuring alignment with existing frameworks. Its proposals included corrections to drafting language, alignment of phrases, and better cross-referencing. The panel also called for significant taxpayer relief by amending the provision that disallows refunds when income tax returns are filed late.
Other notable recommendations included aligning the definition of micro and small enterprises with the MSME Act, clarifying terms such as ‘income’ versus ‘receipts’ for non-profit organisations, addressing the issue of anonymous donations, and removing the deemed application concept to prevent legal disputes. It further proposed clarity on advance ruling fees, tax deduction at source on provident funds, low-tax certificates, and the scope of penalty powers.
Stakeholder feedback also played a role in shaping the final draft, with the government stating that the changes would more accurately convey the intended legal meaning and strengthen the overall framework of the law.
The Bill was passed in the lower house without discussion, mirroring the fate of the Taxation Laws (Amendment) Bill, 2025, which was also cleared without debate the same day. Both moves took place in a charged parliamentary atmosphere, with the Opposition repeatedly demanding a debate on the Bihar electoral roll revision, leading to continued disruptions in both Houses since the start of the Monsoon Session.
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