Govt withdraws Income Tax Bill 2025, revised version could be introduced next week

The government on Friday withdrew the Income-Tax Bill, 2025, which was initially introduced in the Lok Sabha to replace the Income-Tax Act, 1961. The decision was taken on Friday as there is a need to bring in a revised version of the legislation incorporating voluminous recommendations from the Parliament Select Committee.

The report, of the Select Committee of Lok Sabha, chaired by Baijayant Panda, tabled in the Lok Sabha on July 21, observed that the Bill mainly seeks to simplify the language, and does not aim to bring any substantive changes. It noted several drafting issues and recommended addressing them.

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Some of the key recommendations made by the Select panel include reinstating deductions for inter-corporate dividends for certain companies, aligning provisions with the 1961 Act, such as set-off of long-term capital losses and definition of associate enterprises, defining terms like “parent company” and “cooperative bank,” and removing ambiguity around “beneficial owner,” incorporating changes made by the Finance Acts of 2024 and 2025, such as changes to capital assets and tax compliance and removing redundant text, correcting references, and addressing typographical errors.

The Income Tax Bill 2025, aims to simplify tax compliance and reduce the complexity of current tax laws by up to 60 percent. The legislation introduced various restrictions on cash transactions to promote digital payments and curb tax evasion.

Some key provisions included that no person shall receive an amount of two lakh rupees or more in a single transaction, in aggregate from a person in a day, or in respect of transactions relating to one event or occasion from a person.

Also, repayments must be made through account payee cheque, account payee bank draft, electronic clearing system or other prescribed electronic modes.

Expenses exceeding Rs 10,000 paid in cash per day will be disallowed from deductions while calculating taxable income.

The revised bill is expected to address concerns and suggestions from various stakeholders. A parliamentary panel has proposed 285 amendments to the new Income Tax Bill 2025, indicating a significant overhaul of the existing tax laws.

Government sources said that a revised bill would be moved in the Lok Sabha next week.