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Income Tax Bill cleared in Lok Sabha: Here's what it means
Finance minister Nirmala Sitharaman has said the new income tax bill seeks to consolidate and amend the laws relating to income tax and will replace 1961 act
The Lok Sabha on Monday passed the Income Tax Bill 2025 after it included “almost all of the recommendations of the Select Committee”. Union finance minister Nirmala Sitharaman said the new income tax bill — along with the Taxation Laws (Amendment) Bill that was passed too — seeks to update and consolidate laws on the subject, and will replace the 1961 act.
Next, it goes to the Rajya Sabha and, if and when cleared there, to the President for a formal nod.
The income tax bill, in its original form, was introduced in February and then referred to a Parliamentary Select Committee for review. The committee submitted its recommendations on July 21. A modified bill was thus introduced on Monday, August 11.
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Why new bill, will it change income tax rates?
Parliamentary affairs minister Kiren Rijiju earlier addressed apprehensions after the withdrawal of an earlier draft. He said the need for the new bill arose as it would have been tedious to introduce each amendment separately.
The Select Committee of the Lok Sabha, chaired by BJP member Baijayant Panda, made 285 suggestions. "It will be the same bill incorporating all the amendments accepted by the government," Rijiju said.
The income tax department said last week that the new income tax bill does not seek to change tax rates.
"It is clarified that the Income Tax Bill, 2025 aims at language simplification and removal of redundant/obsolete provisions," the department said in a post on X.
The bill carries provisions for digital taxation, systems for resolving disputes, and initiatives to expand tax collection through technological and data-driven methods, TOI has reported.
"Almost all of the recommendations of the Select Committee have been accepted by the government. In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately," the bill's Objectives section said.
The corrections include those in drafting, in the use of phrases and cross-referencing of older or other laws, the report said.
What did parliamentary panel suggest on income tax bill draft?
The Select Committee, made up of 31 MPs, presented findings and suggestions in more than 4,500 pages in July.
Changes include provisions for refund even if returns are delayed, though for the smaller taxpayers, TOI reported.
Definitions of ‘non-performing assets (NPAs)’ and ‘parent company’ have been tweaked for clarity. The committee also suggests that anonymous contributions should not affect NGOs' and charitable trusts' eligibility for tax exemptions.
For individual taxpayers, the recommendations include issuing 'nil' tax-deduction certificates to provide for a cleaner and comprehensive record of all income.
It also allows for waiver of some penalties if non-compliance is found to be unintentional.
