Government Poised to Introduce Revamped Income Tax Bill After Panel Recommendations

Finance Minister Nirmala Sitharaman has withdrawn the Income-Tax Bill, 2025, based on recommendations from a Select Committee led by BJP MP Baijayant Panda. The decision came after the 31-member committee proposed key changes to the legislative document, prompting an uproar among Opposition members in the House.

The Finance Ministry announced plans to introduce a revised version of the Income Tax Bill on Monday, August 11, incorporating significant amendments from the committee's report. Insiders stress the importance of presenting a clear and updated version of the Bill to avoid confusion from multiple versions.

Since the start of the current Monsoon session of Parliament on July 21, the parliamentary panel has been examining the Income-Tax Bill 2025. The panel's extensive 4,584-page report details over 566 suggestions to streamline the language and structure of the proposed law and align it with existing frameworks, ensuring clarity and precise interpretation.

The report also suggests important changes to benefit taxpayers, such as permitting refunds even if filed after the due date, and alignment of the definition of micro and small enterprises with the MSME Act. Recommendations also address ambiguities around non-profit organizations and propose amendments for advance ruling fees, TDS on provident funds, low-tax certificates, and penalty powers.

Originally tabled in Lok Sabha by Minister Sitharaman in February 2025, the new bill aims to simplify the 1961 Income Tax Act, reduce legal disputes, and make it more comprehensible, in line with proposed changes outlined in the July 2024 Budget.