Govt Withdraws Income Tax Bill, 2025 After Panel’s 566 Recommendations; Revised Draft Expected August 11

New Delhi, August 8 (TNA) Finance Minister Nirmala Sitharaman on Friday withdrew the Income Tax Bill, 2025, from the Lok Sabha, in response to extensive recommendations made by a 31-member Select Committee chaired by BJP MP Baijayant Panda.

The withdrawal aimed to incorporate over 500 suggestions contained in the committee’s 4,584-page report, which called for simplifying the bill’s language, correcting drafting errors, and updating definitions to align with current economic realities.

Notable recommendations included:

• Enabling income tax refunds even if returns are filed after the due date.

• Aligning definitions for micro and small enterprises with the MSME Act.

• Clarifying rules for taxing non-profit organisations, particularly regarding terms like ‘income’ versus ‘receipts’, and removing the “deemed application” rule to avoid legal disputes.

• Improving clarity on procedural matters, such as advance ruling fees, TDS on provident funds, low-tax certificates, and penalty provisions.

The original bill, introduced in the Lok Sabha in February 2025, was intended to replace the nearly 65-year-old Income Tax Act, 1961, and was a major reform proposal stemming from the 2024 Union Budget.

A revised version of the bill, incorporating the recommended changes, is set to be introduced in Parliament on August 11, 2025. The government stated that this approach would avoid confusion from multiple versions and ensure a clearer, taxpayer-friendly law that simplifies compliance and reduces future litigation.