New Income-Tax Bill 2025: Why has Centre withdrawn the bill from Lok Sabha? Revised draft to reflect parliament panel suggestions

The Union government has formally withdrawn the Income-Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 to replace the existing Income-Tax Act, 1961,.
A fresh version of the Bill, incorporating most of the recommendations made by the Select Committee chaired by BJP MP Baijayant Panda, is scheduled to be tabled in the Lok Sabha on Monday, August 11.





According to officials familiar with the matter, the withdrawal aims to avoid confusion arising from multiple versions of the Bill. “The new draft will reflect all changes in a consolidated manner and will be placed before the House for consideration,” one of the sources told ET.


What Union minister Nirmala Sitharaman said


Explaining the reason for withdrawal of the bill, Finanace Minister Nirmala Sitharaman said “The Government had introduced the Income-tax Bill, 2025 in the Lok Sabha on 13th of February, 2025 and on the same date it was referred to the Select Committee for examination. The Select Committee has laid its report in the Lok Sabha on the 21st of July, 2025. Almost all of the recommendations of the Select Committee have been accepted by the Government. Suggestions have also been received from other sources 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. Therefore, a decision has been taken by the Government to withdraw the Income-tax Bill, 2025 as reported by the Select Committee. A fresh Bill would be introduced in the Lok Sabha in due course which would replace the Income-tax Act, 1961.” she stated.



The earlier draft, introduced during the Budget Session, was part of the government’s broader plan to modernise and simplify direct tax laws.


The revised Bill is expected to preserve the core structure but will include several technical and procedural modifications recommended by the parliamentary panel.

The 31-member Select Committee had made several suggestions on the Bill.

Among them was a recommendation to continue the tax exemption on anonymous donations made to religious-cum-charitable trusts under the new law. The panel also proposed that taxpayers be allowed to claim TDS refunds even after the due date for filing income tax returns, without incurring any penal charges.

In the revised Bill, the government has exempted non-profit organisations (NPOs) from paying tax on anonymous donations received by purely religious trusts. However, if a religious trust also undertakes other charitable activities—such as running hospitals or educational institutions—any anonymous donations received will be taxed in accordance with the law.



Get an chance to win ₹5000 Amazon Voucher by taking part in India's Biggest Habit Index! Take the survey here