The Centre withdrew the 2025 Income-Tax Bill and will introduce a revised version on August 11. Incorporating Select Committee suggestions, the new bill retains the goal of simplifying direct tax laws, clarifying ambiguities, and reducing litigation.
In a major development during the ongoing Monsoon Session of Parliament, the Centre has reportedly withdrawn the Income-Tax Bill, 2025, just months after it was first introduced. A fresh, revised version will now be tabled on Monday (August 11) adding key suggestions made by a Select Committee led by BJP MP Baijayant Panda, reports said.
Why the U-turn?
The original draft, which was introduced in Parliament on February 13, aimed to replace the decades-old Income-tax Act of 1961 with a cleaner, simplified framework. However, after receiving a flood of amendments and feedback during committee discussions, the government decided to take a step back.
Rather than proceeding with piecemeal changes, officials opted to withdraw the first version entirely and present a more consolidated and refined bill that reflects the committee’s recommendations, reducing scope for confusion in Parliament and among taxpayers.
Simplification with More Clarity
The revised bill stays true to its core promise of simplifying India’s direct tax laws, but adds an extra layer of clarity. A senior source said the updated draft aims to cut legal ambiguities, reduce litigation, and make interpretation easier for taxpayers and officials alike.
GAAR to Be More Taxpayer-Friendly
One of the more notable changes is a softer approach to General Anti-Avoidance Rules (GAAR), a set of laws designed to prevent aggressive tax planning. The committee recommended that GAAR provisions must factor in the context of each case, rather than applying blanket penalties. The goal: strike a better balance between enforcement and fairness.
Access to Digital Devices
A particularly debated section in the original bill was a provision that allowed tax officers to access an individual’s digital devices, even bypassing passwords, in cases involving undisclosed income or foreign assets. This triggered concerns about privacy and overreach from legal and tax professionals.
The Finance Ministry, however, clarified that this was not a new power but a restatement of existing authority, already upheld by courts and backed by departmental circulars. The committee agreed with the clarification, but recommended refined wording to make the provision less open to misinterpretation.
What the Original Bill Proposed
When first tabled, the Income-Tax Bill, 2025 was seen as a bold attempt to modernise and declutter India’s tax laws. Here’s a look at its key features:
- Simplified language: Shorter provisions, fewer legal jargons, and consolidated deductions to make compliance easier.
- Lower penalties for select offences to make the tax regime less punitive.
- No changes to tax slabs or rates: The bill retained current tax categories and income classifications.
- Reduced litigation: A “trust first, scrutinise later” approach aimed at removing over 300 outdated provisions.
- Modernised administration: Greater powers to the CBDT for framing rules, enhanced digital monitoring, and a shift to a “tax year” concept to reduce confusion between financial and assessment years.
The original version was structured across 23 chapters, 536 sections, and 16 schedules, using tables and formulas to make interpretation more straightforward compared to the existing law.