Lok Sabha passes the modified New Income Tax Bill 2025, replacing the six-decade-old Income-Tax Act, 1961, with updated provisions.
New Delhi : In a significant legislative move, the Lok Sabha on Monday passed the modified New Income Tax Bill 2025, aiming to overhaul India’s taxation framework for the first time in more than six decades. Finance Minister Nirmala Sitharaman introduced the updated draft earlier in the day, after the government formally withdrew the original bill presented in February this year.
The original Income-Tax Bill, 2025, intended to replace the Income-Tax Act, 1961, was tabled on February 13 but faced extensive scrutiny from the Parliamentary Select Committee. Following detailed consultations, the government accepted nearly all of the committee’s 285 recommendations, making substantial revisions to the draft. The revised version—formally titled the Income-Tax (No. 2) Bill, 2025—was presented and passed on August 11.
Sitharaman emphasised that the new legislation is designed to simplify compliance, enhance transparency, and modernise the taxation process, including digital tax provisions, dispute resolution mechanisms, and expanded use of technology and data analytics for tax collection. “Almost all of the recommendations of the Select Committee have been accepted,” she noted, adding that feedback from various stakeholders had also been incorporated to ensure legal clarity.
The Finance Ministry clarified that the withdrawal of the earlier draft was necessary to avoid confusion from multiple versions in circulation. Officials stated that consolidating all approved changes into a single comprehensive document would ensure smoother implementation and greater legal certainty.
The Parliamentary Select Committee, chaired by BJP MP Baijayant Panda, submitted its exhaustive 4,575-page report last month. Among its 32 major recommendations were a revised definition of “beneficial owner” to allow the carry-forward of losses, reinstatement of inter-corporate dividend deductions, a standard 30% deduction post-municipal tax, and extending pre-construction interest deductions to let-out properties.
For individual taxpayers, the committee suggested simplifying compliance through measures like issuing ‘Nil’ tax deduction certificates, granting discretionary waivers for unintentional non-compliance, and enabling refunds for delayed income tax return submissions by small taxpayers.
The panel also called for greater clarity on the definition of non-performing assets (NPAs) to reduce disputes, precise definitions of “parent company,” and explicit provisions for non-profit organisations and religious-cum-charitable trusts, ensuring anonymous donations do not jeopardise their tax-exempt status. Additionally, it recommended removing all residual references to the old 1961 Act to create a dispute-resistant, unified tax code.
With the passage of the revised bill, the government is set to implement one of the most comprehensive tax reforms in recent history—marking a pivotal shift towards a modern, technology-driven, and streamlined taxation regime in India.
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| Finance Minister Nirmala Sitharaman. File Image |
New Delhi : In a significant legislative move, the Lok Sabha on Monday passed the modified New Income Tax Bill 2025, aiming to overhaul India’s taxation framework for the first time in more than six decades. Finance Minister Nirmala Sitharaman introduced the updated draft earlier in the day, after the government formally withdrew the original bill presented in February this year.
The original Income-Tax Bill, 2025, intended to replace the Income-Tax Act, 1961, was tabled on February 13 but faced extensive scrutiny from the Parliamentary Select Committee. Following detailed consultations, the government accepted nearly all of the committee’s 285 recommendations, making substantial revisions to the draft. The revised version—formally titled the Income-Tax (No. 2) Bill, 2025—was presented and passed on August 11.
Sitharaman emphasised that the new legislation is designed to simplify compliance, enhance transparency, and modernise the taxation process, including digital tax provisions, dispute resolution mechanisms, and expanded use of technology and data analytics for tax collection. “Almost all of the recommendations of the Select Committee have been accepted,” she noted, adding that feedback from various stakeholders had also been incorporated to ensure legal clarity.
The Finance Ministry clarified that the withdrawal of the earlier draft was necessary to avoid confusion from multiple versions in circulation. Officials stated that consolidating all approved changes into a single comprehensive document would ensure smoother implementation and greater legal certainty.
The Parliamentary Select Committee, chaired by BJP MP Baijayant Panda, submitted its exhaustive 4,575-page report last month. Among its 32 major recommendations were a revised definition of “beneficial owner” to allow the carry-forward of losses, reinstatement of inter-corporate dividend deductions, a standard 30% deduction post-municipal tax, and extending pre-construction interest deductions to let-out properties.
For individual taxpayers, the committee suggested simplifying compliance through measures like issuing ‘Nil’ tax deduction certificates, granting discretionary waivers for unintentional non-compliance, and enabling refunds for delayed income tax return submissions by small taxpayers.
The panel also called for greater clarity on the definition of non-performing assets (NPAs) to reduce disputes, precise definitions of “parent company,” and explicit provisions for non-profit organisations and religious-cum-charitable trusts, ensuring anonymous donations do not jeopardise their tax-exempt status. Additionally, it recommended removing all residual references to the old 1961 Act to create a dispute-resistant, unified tax code.
With the passage of the revised bill, the government is set to implement one of the most comprehensive tax reforms in recent history—marking a pivotal shift towards a modern, technology-driven, and streamlined taxation regime in India.
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