Fresh Version Of Income-Tax Bill Coming: What Taxpayers Can Expect

In a procedural but significant development, the Union Finance Minister Nirmala Sitharaman has withdrawn the Income-tax Bill, 2025, originally introduced in the Lok Sabha on Feb. 13, 2025. This decision has drawn some criticism, particularly over concerns that the considerable time and effort invested in the earlier version of the Bill may go to waste. However, the government has defended the move as a necessary step for legislative efficiency.

Why the Bill Was Withdrawn

The Finance Minister stated that the withdrawal was necessitated by the need to incorporate several technical corrections, including drafting refinements, alignment of phrases, and proper cross-referencing — all of which are critical to ensuring legislative clarity and coherence.

The government also cited the extensive number of suggestions made by the Select Committee of Parliament, chaired by Baijayant Panda, as a key reason for taking this route.

Government Responds to Criticism

Responding to criticisms about the withdrawal, Minister of Parliamentary Affairs Kiren Rijiju clarified the rationale behind the move. “On criticisms of withdrawing the new bill and ignoring the earlier one, for which a lot of work was done — and all the work and time spent will go down — that is not the case,” he said.

Rijiju explained that when a parliamentary committee submits a report with several proposed amendments, and many of them are accepted by the government, the standard practice is to withdraw the original bill and introduce a revised version. “This makes it easier for Parliament to consider and pass the Bill in its updated form,” he added.

He further explained the procedural complexity: “To incorporate each amendment, three separate motions have to be moved. While this is manageable for a small number of changes, it's impractical when over 285 changes, including 32 major ones, are recommended. Hence, withdrawing and reintroducing the Bill saves time and ensures procedural efficiency.”

What the New Bill Will Include?

The revised Bill is expected to incorporate the majority of the 285 recommendations made by the Select Committee, including significant proposals related to Anonymous donations exclusively to purely religious trusts—those also running social services such as schools or hospitals will no longer qualify. In a move to ease compliance, the government may allow taxpayers to claim TDS refunds even after the ITR filing deadline, without facing penalties.

The Bill also proposes safeguards for fairer assessments, requiring tax officials to issue notices and consider taxpayer responses before initiating any action. Emphasizing a digital-first approach, the new framework will promote automation and faceless processes to enhance convenience and reduce the scope for corruption.

Additionally, the Bill aims to simplify legal language, replacing the complex terminology of the 1961 Act with clearer, more accessible wording for better public understanding.

The new version of the Income-tax Bill, 2025 is expected to be introduced in the Lok Sabha by FM at 12 PM on Monday. This new draft aims to replace the existing Income-tax Act, 1961, with a more modern, simplified, and litigation-resistant direct tax code.

This legislative reset represents one of the most ambitious tax reforms in recent decades. While the withdrawal of the earlier Bill may seem like a step back, it is actually part of a deliberate process to ensure that the final legislation reflects broad consensus, includes critical feedback, and is structured for long-term stability.