The Central government has withdrawn the Income Tax Bill 2025, which was tabled during the Budget Session of the Parliament in February. The government will introduce a new updated version of the bill on August 11.
The bill was withdrawn after the Select Committee, chaired by Baijayant Panda, made some recommendations that would now be incorporated. The Government had introduced the Income-tax Bill, 2025 in the Lok Sabha on February 13, 2025, and on the same date it was referred to the Select Committee for examination.
On July 21, the Select Committee laid its report in the Lok Sabha. Almost all of the recommendations of the Select Committee were accepted by the government.
Why the bill was withdrawn?
Speaking about the reasons of the withdrawal, Finance Minister Nirmala Sitharaman said, “Suggestions have been received which are required to be incorporated to convey the correct legislative meaning. There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing.”
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In the older bill, several drafting errors were found by the CAs and lawyers and some were flagged by the Lok Sabha Select Committee.
What are some of the changes that would be made?
-Clause 21 (Annual Value of Property): According to a report by the ET, the committee identified issues in Clause 21(2) that could create ambiguity. It is recommended to delete the phrase “in normal course” to add a clear comparison between the actual rent and the deeming rent.
-Clause 2 (Deductions from income from house property): The committee recommended that a standard 30 per cent must be deducted on the annual value by cutting municipal taxes.
Moreover, it recommended extending the deduction for pre-construction interests to let out properties.
-Clause 19 (Deductions from salaries): The panel recommended that for non-employees receiving pensions from the funds, a deduction for their commuted pension, similar to that for employees, be allowed under “Income from other sources“.
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-Clause 20 (Commercial property): The Select Committee of the Lok Sabha warned the government that “occupied” should be changed to “as he may occupy” to avoid taxing temporarily unused business properties as “house property” income.
Why govt is pushing for Income Tax act?
The Income Tax Bill is necessary to replace the existing 1961 Act, which has 298 sections and has over 5 lakh words. The new bill aims to provide a modern, taxpayer-friendly law that is written in simple language and is about half the size of the current statute.