Government withdraws Income Tax Bill 2025: Fresh draft to reduce complexity, boost savings for middle-class and MSMEs

Time of India

2 days ago

The Income Tax Bill, 2025 introduced in the Lok Sabha on February 13 to replace the Income Tax Act, 1961 has been officially withdrawn. The government will present a revised version on Monday, incorporating most recommendations made by the Select Committee chaired by BJP MP Baijayant Jay Panda.
Officials say the decision to withdraw the earlier draft aims to avoid confusion from multiple versions and to present a single, updated Bill with all changes consolidated for Parliament's consideration.
Why the bill is being replaced
Baijayant Panda said the move was necessary to simplify India's decades-old tax law, which has been amended over 4,000 times and now spans over five lakh words. 'The new bill simplifies that by nearly 50 per cent, making it far easier for ordinary taxpayers to read and understand,' he told IANS.
Wow. Gov withdraws the new income tax bill. pic.twitter.com/iWJBUAgTfJ
Panda noted that the greatest beneficiaries of the simplification would be small business owners and MSMEs, who often face challenges due to lack of legal and financial expertise in navigating complex tax regulations.
Impact on taxpayers and businesses
According to the government, the new Bill aims to create a fairer and more equitable direct tax system without adding extra burdens on the working and middle-class population. Slabs and rates have been restructured to benefit all taxpayers, with a particular focus on reducing taxes for the middle class.
Officials say this will put more disposable income in people's hands, which in turn is expected to boost household consumption, savings, and investments.
Govt withdraws The Income tax bill 2025 as reported by the Select Committee. A Fresh bill would be introduced in due course for a limited purpose of incorporating corrections in the nature of drafting, alignment of phrases, cross referencing.#Incometax #Finance pic.twitter.com/GiD5MNrhfU
Key tax changes in the Finance Act, 2025
The Finance Act, 2025 has increased the income threshold for claiming a tax rebate under Section 87A for resident individuals taxable under the new regime (Section 115BAC) from ₹7 lakh to ₹12 lakh. The maximum rebate amount has been raised from ₹25,000 to ₹60,000.
Marginal relief will continue to apply for incomes slightly above ₹12 lakh, ensuring taxpayers just over the threshold are not disproportionately taxed. The Finance Ministry has stated that the updated Bill will make filing taxes easier for both individuals and small enterprises.
The government expects the revised Income Tax Bill to mark the most significant overhaul of India's direct tax system in decades, simplifying compliance and providing relief to millions of taxpayers.
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