New Income Tax Bill 2025 Unveiled in Parliament Key Suggestions from Parliamentary Panel Revealed
Finance Minister Nirmala Sitharaman has unveiled a revised version of the New Income Tax Bill 2025 in Parliament, following the withdrawal of the previous draft. The original bill, introduced in February, aimed to modernize India’s taxation framework, which has been in place for over six decades. The updated bill incorporates feedback from a parliamentary committee and includes significant changes designed to enhance tax collection and simplify compliance for taxpayers.
Withdrawal of the Previous Bill
The government decided to withdraw the initial Income-Tax Bill, 2025, to eliminate confusion stemming from multiple drafts. This decision came after the Parliamentary Select Committee, led by BJP MP Baijayant Panda, provided extensive feedback on the original proposal. The new version, referred to as the Income-Tax (No. 2) Bill, 2025, was introduced on August 11, incorporating the majority of the 285 recommendations made by the committee. Sitharaman emphasized that the revised legislation aims to streamline income tax regulations and replace the outdated Income Tax Act of 1961. The government has accepted nearly all of the committee’s suggestions, ensuring that the new bill reflects a more accurate legal framework.
Key Features of the New Bill
The New Income Tax Bill 2025 is designed to modernize India’s tax system by introducing a range of provisions. These include a revised structure for digital taxation, improved dispute resolution mechanisms, and initiatives to enhance tax collection through technology and data analytics. The bill aims to simplify compliance for individual taxpayers by introducing measures such as ‘Nil’ tax deduction certificates and discretionary waivers for unintentional non-compliance. Additionally, the proposal seeks to clarify definitions related to non-performing assets (NPAs) to reduce disputes in tax and banking interpretations.
The committee’s recommendations also address the need for precise definitions of terms like “beneficial owner” and “parent company,” ensuring that taxpayers have a clear understanding of their obligations. Furthermore, the bill proposes to eliminate references to the old Income Tax Act, creating a comprehensive and dispute-resistant new code.
Recommendations from the Parliamentary Select Committee
The Parliamentary Select Committee’s report, spanning 4,575 pages, included both minor adjustments and significant modifications to the original bill. Among the key recommendations is the reinstatement of the inter-corporate dividend deduction, which had been omitted in the initial draft. The committee also suggested implementing a standard 30% deduction after municipal tax deductions and extending pre-construction interest deductions to let-out properties.
To enhance taxpayer compliance, the committee proposed issuing ‘Nil’ tax deduction certificates and allowing for penalty waivers in cases of unintentional non-compliance. Additionally, the committee called for improved clarity regarding the definition of non-performing assets to minimize prolonged disagreements. The recommendations aim to create a more user-friendly tax environment, particularly for individual taxpayers and small businesses.
Next Steps for the New Income Tax Bill
With the introduction of the Income-Tax (No. 2) Bill, 2025, the government is poised to move forward with the legislative process. The bill will undergo further scrutiny and debate in Parliament, where lawmakers will assess its implications for taxpayers and the broader economy. The government’s commitment to incorporating feedback from the Parliamentary Select Committee reflects a collaborative approach to reforming India’s tax system. As the bill progresses, stakeholders will be closely monitoring its development, anticipating changes that could significantly impact tax compliance and collection in the country.
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