New Delhi: Finance Minister Nirmala Sitharaman on Monday, August 11, introduced the New Income Tax (No 2) Bill, 2025 in Parliament, aiming to overhaul and simplify the country’s taxation framework for the first time in over six decades.
The move comes after the government withdrew the earlier version of the bill last week to avoid confusion and present a single, updated draft.
As per reports, the revised legislation incorporates almost all of the 285 recommendations made by the Parliamentary Select Committee chaired by BJP MP Baijayant Panda. Sitharaman told the House that the government has also acted on stakeholder feedback to ensure “the proposed legal meaning is conveyed more accurately”.
Why Was the First Bill Withdrawn?
The original Income-Tax Bill, 2025 was tabled in February as a replacement for the Income-Tax Act, 1961. However, feedback from the Select Committee, whose 31 members submitted a 4,575-page report, necessitated substantial modifications.
Officials, as cited by The Times of India, said the withdrawal was essential to prevent “multiple versions circulating” and to consolidate all approved changes into a single, dispute-resistant draft.
Here Are Key Changes Recommended by the Panel
The committee’s suggestions range from technical clarifications to major policy shifts. Notable proposals include:
1. Redefining “beneficial owner” to allow taxpayers to carry forward losses when receiving share benefits during the tax year.
2. Reinstating the inter-corporate dividend deduction and introducing a standard 30% deduction post municipal tax for property owners, with extended pre-construction interest deductions for let-out properties.
3. Simplifying compliance by issuing ‘Nil’ tax deduction certificates, waiving penalties for unintentional errors, and allowing refunds for delayed ITR submissions by small taxpayers.
4. Clearer definitions for non-performing assets to reduce disputes between tax authorities and banks.
5. Updated provisions for non-profit and religious-cum-charitable trusts, ensuring anonymous donations do not affect tax exemptions.
6. Removing all remaining references to the Income-Tax Act, 1961 to create a clean, modern code.
