Government to Table New Income Tax Bill on August 11, After Withdrawing Initial Draft

In a move to simplify India’s direct tax laws, the Centre has withdrawn the initial draft of the Income-Tax Bill, 2025, which was first introduced on February 13. A new, revised version of the bill is set to be tabled in Parliament on Monday, August 11, after incorporating key changes recommended by a Select Committee led by Baijayant Panda.

The original bill's goal was to overhaul the Income Tax Act, 1961, by reducing legal complexities. However, a number of amendments emerged from committee reviews, leading the government to withdraw the first draft to prevent confusion and present a consolidated version for debate.

The new version will keep the original intent of simplification while adding clarity to avoid any ambiguity. A central objective is to reduce disputes over interpretation and organize scattered tax provisions into a more coherent structure.
 

One significant recommendation from the Select Committee is a more taxpayer-friendly approach to India’s General Anti-Avoidance Rules (GAAR). The finance ministry clarified that the language in the new bill does not introduce new legal powers but rather restates existing law in clearer terms, a position that was accepted by the committee with some adjustments.

“Post the New Income Tax Bill, 2025 was tabled before the Indian Parliament in February 2025, the draft Bill was referred to a Select Committee for review and recommendations. In the meantime, feedback was also sought from industry bodies and professional associations. The Select Committee has considered most of the major concerns raised and has sought to clarify provisions that were causing uncertainty. For instance, it appeared that applications for Nil TDS certificates would not be permitted, inter-corporate dividend deductions would be disallowed, the definition of resident for individuals moving abroad for employment was to be tweaked, and refunds could not be claimed if the return was filed after the original due date. The Committee reviewed the language and suggested an amendment to clarify the confusion. As the next step, the Bill tabled in February 2025 will be formally withdrawn, and a revised version incorporating most of the Committee’s suggestions will be introduced in Parliament on Monday. This approach will avoid confusion from multiple versions of the Bill and provide a single, updated text with all recommended changes integrated. The revised Bill will then be debated in Parliament and taken forward in the legislative process, with the intention of implementation from 1 April 2026. Here, Government has already announced that related rules and forms are already being prepared. However, it is critical that the Bill be finalized promptly so that the necessary compliances, rules, and forms can be issued in time. This will allow industry sufficient lead time to incorporate the changes into their ERP systems, ” CA Gaurav Makhijani, Associate Partner and Head of Tax (North India & Gujarat) at Rödl & Partner India said. 

The withdrawn draft had proposed several key reforms, including:

Simplified legal language: Shorter, clearer provisions with fewer provisos and explanations.

Lower penalties: A move to make the tax regime more taxpayer-friendly for select offenses.

No change in tax rates: Existing tax slabs, capital gains rules, deadlines, and income classifications would remain the same.

Reduced litigation: The adoption of a “trust first, scrutinise later” approach and the removal of more than 300 outdated provisions.

Modern administration: Enhanced powers for the Central Board of Direct Taxes (CBDT) to create rules, use digital monitoring, and introduce a “tax year” concept to eliminate confusion between financial and assessment years.

The proposed bill is structured across 23 chapters, 536 sections, and 16 schedules, using tables and formulas to simplify interpretation, making it more organized than the previous Income-tax Act, 1961.

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