On Friday, the government officially withdrew the Income-Tax Bill, 2025 which was first introduced in the Lok Sabha on February 13 to replace the decades-old Income-Tax Act of 1961. A new and updated version of the bill, reflecting most of the recommendations from the Select Committee led by BJP MP Baijayant Panda, is set to be introduced in Parliament on Monday, August 11.

According to a report by Moneycontrol, the government withdrew the original Bill to avoid confusion caused by having multiple versions. This way, the Parliament will review just one updated and clear document. Sources said the revised Bill will include all the changes and suggestions received so far.

Baijayant Panda, who led the Parliamentary Select Committee that reviewed the Bill, said the new law will simplify India’s long-standing tax system. Once passed, it will reduce legal confusion and help individuals and small businesses avoid unnecessary court cases.

“The current Income Tax Act of 1961 has undergone more than 4,000 amendments and contains over 5 lakh words. It has become too complex. The new bill simplifies that by nearly 50 per cent — making it far easier for ordinary taxpayers to read and understand,” Panda told IANS recently.

He further stated that the greatest beneficiaries of this simplification would be small business owners and MSMEs who often lack the legal and financial expertise to navigate complicated tax structures.

The new measures will play a significant role in creating a fair and equitable system of direct taxation that ensures no additional burden of direct taxes on the working and middle-class population of the country.

Slabs and rates have been changed across the board to benefit all taxpayers. The new structure substantially reduces the taxes of the middle class and leaves more money in their hands, boosting household consumption, savings and investment, according to the government.

The Finance Act, 2025, has increased the income threshold for claiming a tax rebate under section 87A of the Income Tax Act, 1961 for resident individual taxable under the new tax regime under section 115 BAC of the Act from Rs 7 lakh to Rs 12 lakh, and the maximum rebate amount has been raised from Rs 25,000 to Rs 60,000.

Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs 12,00,000, as per the Finance Ministry. The new income tax bill will make filing taxes easier for common citizens and small businesses. (With IANS Inputs)

FAQs

What is income tax bill, 2025?

The Income Tax Bill, 2025 is a proposed legislation introduced by the Indian government in the Lok Sabha. Its primary objective is to simplify and modernize India’s direct taxation system, making it more transparent, efficient, and taxpayer-friendly.

When was income tax bill, 2025 introduced?

The Income Tax Bill, 2025 was introduced in the Lok Sabha on February 13, 2025, by Finance Minister Nirmala Sitharaman.