The Union Government has dropped the Income-Tax Bill, 2025, which sought to replace the six-decade-old Income-Tax Act, 1961. It was decided to incorporate all of the major amendments into a new version of the law in order to prevent confusion caused by several drafts.
On August 11, 2025, a new and final draft that is primarily based on the Select Committee’s recommendations will be presented to the Lok Sabha.
Why the Withdrawal?
Union Finance Minister Nirmala Sitharaman explained the rationale behind the move during a session in Parliament.
“The Government had introduced the Income-tax Bill, 2025 in the Lok Sabha on 13th of February, 2025 and on the same date it was referred to the Select Committee for examination,” she said.
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“The Select Committee has laid its report in the Lok Sabha on the 21st of July, 2025. Almost all of the recommendations of the Select Committee have been accepted by the Government.”
Sitharaman added that, moreover, the changes include corrections in drafting, phrasing, cross-referencing, and alignment — all of which are crucial for ensuring the law’s legislative clarity.
What’s New in the Upcoming Bill?
Officials said the revised bill would incorporate a wide range of procedural and technical improvements. The core objective remains to modernise India’s direct tax system while ensuring fairness and efficiency
Key changes expected include:
- Technical clarifications in legal phrasing
- Alignment with Select Committee suggestions
- Additional public and institutional feedback
Religious Trusts Get Clarity on Anonymous Donations
One major highlight is how the revised bill treats donations to religious and charitable trusts. The Select Committee had recommended continuing exemptions on anonymous donations to purely religious trusts.
The new bill will retain this benefit. However, if a religious trust also engages in charitable activities—like running hospitals or schools—then anonymous donations to such mixed-purpose organisations will be taxed.
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Another significant proposal in the revised bill aims to benefit taxpayers. It allows them to claim TDS (Tax Deducted at Source) refunds even after the due date for filing returns. Earlier, missing the deadline could attract penal charges. The new provision aims to ease the taxpayer burden and improve compliance.
The Road Ahead
To maintain openness and prevent public confusion, the government made a clear indication. The revised draft bill will, therefore, be released in a ‘consolidated way.’ Moreover, the withdrawal is merely a procedural step, not a policy reversal.
“A fresh Bill would be introduced in the Lok Sabha in due course, which would replace the Income-tax Act, 1961,” Sitharaman confirmed. The stage is now set for one of India’s most significant tax law reforms in decades.
