New Income Tax Bill 2025: The government has withdrawn the Income-Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 to replace the Income-Tax Act, 1961, and will table a revised version
on Monday, August 11.
The updated draft incorporates most of the 285 recommendations made by the Parliamentary Select Committee that examined the earlier Bill and submitted its report on July 21. The primary focus of these changes is on simplifying the language of the legislation. The previous version was withdrawn after the committee’s report, with further modifications added based on inputs from other stakeholders. These changes largely relate to drafting, phrase alignment, consequential updates, and cross-referencing.
Key changes proposed by the committee
- Tax refunds
- Removal of the provision that denied income-tax refunds if returns were filed after the due date.
- The withdrawn version required taxpayers to file ITRs within the due date to claim a refund (Section 433). The revised Bill ensures refunds can still be claimed even if the ITR is filed late.
- Inter-corporate dividends
- Restoration of Section 80M deduction (Clause 148) for inter-corporate dividends for companies availing the special tax rate under Section 115BAA.
- This provision had been missed in the earlier draft.
- Nil TDS certificate
- Taxpayers will be allowed to avail of Nil TDS certificates, enabling no tax deduction at source under certain conditions.
- Exemption on anonymous donations
- Anonymous donations to purely religious trusts will be exempt from tax. The exemption will not apply to trusts that are both religious and engaged in social services such as running hospitals or schools.
- Digital-first tax process
- The new Bill aims to make the tax process more digital, automated, and faceless, to enhance convenience and minimise the scope for corruption.
Clarification on capital gains tax rumours
Reports last month suggested that the new Bill might change capital gains tax rates. The Income Tax Department denied this in a post on X, stating that the Bill’s objective is language simplification and removal of redundant or obsolete provisions, not altering tax rates.
There are news articles circulating on various media platforms that the new Income Tax Bill, 2025 proposes to change tax rates on LTCG for certain categories of taxpayers.
It is clarified that the Income Tax Bill, 2025 aims at language simplification and removal of…
— Income Tax India (@IncomeTaxIndia) July 29, 2025
Expert view
Vivek Jalan, Partner, Tax Connect Advisory Services LLP, said: “Clause 263(1)(a)(ix) of the Feb ’25 Income Tax Bill required that a person seeking refunds under Chapter XX must mandatorily file returns within the due date. This would have caused hardship for taxpayers missing deadlines due to genuine reasons. The Ministry of Finance has appropriately deleted this clause in the final draft to avoid unnecessary litigation. In the revised Bill, Clause (ix) will be removed and later clauses will move up accordingly.”
The Income-Tax Act, 1961, in force since April 1, 1962, has been amended 65 times with over 4,000 amendments. The new Bill seeks to replace it entirely.
What next?
All eyes are now on August 11, when the government will table the revised Bill in the Lok Sabha. It is expected to not only replace the six-decade-old tax law but also simplify compliance and improve the taxpayer experience. More details on its implementation and impact will emerge once it is formally introduced.
