New Income Tax Bill tabled in Lok Sabha after govt withdraws February draft
Nirmala Sitharaman
on Monday introduced a revised version of the
Income Tax
Bill in the Lok Sabha, incorporating most of the recommendations made by the Select Committee headed by Baijayant Panda.
The move follows the government's decision last week to withdraw the Income-Tax Bill, 2025, which was presented on February 13 to replace the six-decade-old Income-Tax Act, 1961. The new draft, tabled on August 11, aims to provide lawmakers with a single, updated version that reflects all suggested changes.
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Explaining the withdrawal in Parliament, Sitharaman said, 'Suggestions have been received which are required to be incorporated to convey the correct legislative meaning. There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing.' She added that the earlier Bill was pulled back to avoid confusion and that the fresh draft will serve as the basis for replacing the 1961 Act.
Key recommendations by the Select Committee
The parliamentary panel had flagged multiple drafting errors and suggested amendments to reduce ambiguity:
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Clause 21 (Annual value of property): Remove the term 'in normal course' and add a clear comparison between actual rent and 'deemed rent' for vacant properties.
Clause 22 (Deductions from house property income): Specify that the 30% standard deduction applies after deducting municipal taxes; extend pre-construction interest deduction to let-out properties.
Clause 19 (Salary deductions – Schedule VII): Allow commuted pension deductions for non-employees receiving pensions from a fund.
Clause 20 (Commercial property): Modify wording to avoid taxing temporarily unused business properties as 'house property' income.
The Committee said these changes would improve fairness and clarity while aligning the law with existing provisions.
Provisions in the withdrawn Bill
The February draft was described as the most significant reform of India's direct tax code in over 60 years. Key features included:
Simplified language, consolidation of deductions, and shorter provisions to ease compliance.
Lower penalties for certain offences to make the system more taxpayer-friendly.
No change in tax slabs, capital gains rules, or income categories.
Reduction in litigation through a 'trust first, scrutinise later' approach.
Modern administration with enhanced CBDT powers, digital monitoring, and the introduction of a 'tax year' concept.
The earlier draft had 23 chapters, 536 sections, and 16 schedules, using tables and formulas for easier interpretation. It also proposed streamlined TDS rules, simplified depreciation provisions, and retention of residency criteria and financial year timelines.
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