Income-Tax Bill, 2025 withdrawn in Lok Sabha by Finance Minister Nirmala Sitharaman on Friday:
The Select Committee submitted its report on July 21, 2025 wherein most of its recommendations have been accepted.
The govt has cited need for drafting corrections, phrase alignment, consequential changes, and cross-referencing.
The government on Friday (August 8 2025) formally withdrew the Income-Tax Bill, 2025, just months after it was introduced in the Lok Sabha to replace the 63-year-old Income-Tax Act, 1961.
The Bill, tabled on February 13 this year, had been sent to a Select Committee for review the same day. The panel, chaired by BJP MP Baijayant Panda, submitted its report on July 21, with a set of recommendations, most of which the government says it has accepted.
In its official statement, the Finance Ministry said the decision to withdraw the earlier draft was taken to incorporate additional suggestions from other quarters, make drafting corrections, align phrases, and ensure proper cross-referencing. “A fresh Bill would be introduced in the Lok Sabha in due course which would replace the Income-tax Act, 1961,” the statement said.
According to CA Ashish Niraj, Partner, A S N & Company Chartered Accountants the Finance Minister has rightly withdrawn "The Finance Bill 2025" as there were numerous errors pointed out by the Select Committee. “There was scope of better alignment of phrases, cross referencing, etc. Also, original Bill and then the copy of Reviewed Bill were doing rounds which was creating confusion,” he adds.
Government officials, too, noted that introducing a new, updated version will avoid confusion caused by multiple drafts and give lawmakers a single, consolidated text to work with. The revised Bill is expected to be tabled in the Lok Sabha on Monday, August 11, and will carry most of the Select Committee’s recommendations.
The new draft aims to modernise India’s direct tax framework while also simplifying compliance for the common taxpayers and resolve long-standing issues in tax administration. The Select Committee’s review had covered key provisions in detail before finalising its report. Some of these changes directly impact taxpayers, as CA Niraj rightly points out:
“Clause 263(1)(a)(ix) in the February draft made it compulsory to file ITR to claim refund, even if income is below the basic exemption limit. This would have impacted individuals with TDS deducted but no taxable income, forcing them to file returns for refunds.”
Moreover, for vacant property valuation, he notes the current tax law (as per the Income Tax Act, 1961) provides a clear deemed let-out calculation using fair rent, municipal rent, and standard rent comparisons.
However, the new Bill added a “let in normal course” for vacant property rent calculation, making it subjective and open to varying interpretations. To resolve this, the Select Committee has suggested deleting “in normal course”, which would avoid ambiguity.
The withdrawal of the ITB 2025 happened in the midst of a noisy Lok Sabha session today, with opposition MPs demanding a debate on the ongoing revision of electoral rolls in Bihar. Proceedings were adjourned for the day soon after Finance Minister Nirmala Sitharaman moved to withdraw the Bill.
