New Income Tax Bill 2025: What Select Committee had proposed to change in draft bill

Finance Minister Nirmala Sitharaman on Friday moved to withdraw the New Income Tax Bill, 2025, after a Parliamentary Select Committee led by BJP MP Baijayant Panda submitted extensive suggestions for revisions. The revised version of the Bill is scheduled to be reintroduced in Parliament on August 11.

Sitharaman moved to withdraw the Bill just before the House was adjourned, following a request from Krishna Prasad Tenneti, who was presiding as Chair, to seek permission for the withdrawal. The government stated that it will soon present an updated version of the Bill, incorporating the changes recommended by the Select Committee. 

The original Income Tax Bill, 2025, introduced in the Lok Sabha on February 13, aimed to replace the existing Income Tax Act, 1961, which has governed India’s tax system for over 60 years. The proposed overhaul sought to modernise the tax framework, streamline compliance, reduce litigation, and align India’s tax laws with global best practices.

However, the Bill faced resistance from Opposition members and scrutiny from a 31-member Parliamentary Select Committee that reviewed it thoroughly and proposed several modifications.

The Select Committee presented its report in the Lok Sabha on July 21, containing 285 recommendations focused on simplifying the tax code and making it more transparent and easier to interpret.

Key highlights from the Committee’s report include:

Tightening definitions and removing ambiguities to align the law with existing tax frameworks.

Identification of numerous drafting errors and corrections essential for clarity and unambiguous interpretation.

A total of 566 suggestions were compiled in a detailed 4,584-page report.

Among the major suggested changes:

Removal of the provision denying income tax refunds if returns are filed past the due date, allowing delayed filers to claim refunds.

Inclusion of Section 80M deduction provisions for inter-corporate dividends under the special rate benefits in Section 115BAA.

Allowing taxpayers to obtain NIL TDS certificates.

Clarification that no changes to tax rates, including Long-Term Capital Gains (LTCG), are recommended, contradicting earlier media reports.

Aligning the definitions of micro and small enterprises with those under the MSME Act.

Amendments for clearer rules on advance ruling fees, TDS on provident funds, issuance of low-tax certificates, and penalty provisions.

The withdrawal and planned revision underscore the government’s commitment to introducing a more refined and comprehensive direct tax legislation while ensuring that concerns from stakeholders and parliamentarians are addressed effectively. The new Bill’s reintroduction on August 11 will reflect these changes, aiming to create a more modern, taxpayer-friendly tax code for India.