1. Why Was the Income Tax Bill Withdrawn?

The original bill, introduced on February 13, 2025, aimed to bring clarity and simplification to India’s complex tax code. It was meant to replace the exhaustive Income-Tax Act, 1961.

However, after review by a 31-member select committee, several drafting issues came to light—such as unclear language, misaligned clauses, and potentially unfair tax interpretations. To avoid confusion caused by multiple versions, the government withdrew the bill and opted for a clean, consolidated rewrite

2. Key Fixes Recommended by Experts & the Select Committee

The select committee, chaired by MP Baijayant Panda, flagged several critical areas needing correction:

• A. House Property Clauses (Clauses 21 & 22)
  • Suggested removing vague phrasing such as “in normal course.”
  • Recommended detailing how to compare actual rent with deemed rent more clearly.
  • Advised that standard 30% deductions be calculated after deducting municipal taxes.
  • Expanded deductions on pre-construction interest to include rented properties
• B. Salaried Income & Pension Clauses (Clause 19)
  • Introduced the right for non-employees receiving commuted pension to claim deductions under "income from other sources"—matching benefits available to salaried employees
• C. Commercial Property Definition (Clause 20)
  • Clarified language to prevent misclassifying property types by shifting wording from “occupied” to “as he may occupy”.
• D. Other Adjustments
  • Restored tax exemption on anonymous donations to purely religious trusts (but not to those engaged in charitable work like hospitals or schools).
  • Allowed taxpayers to get TDS refunds even after the ITR filing due date, without penalties.

3. What’s the Bill’s Goal? A Simpler, Fairer Tax System

The revamped Income Tax Bill, 2025 is part of a broader effort to simplify India’s income tax framework. The 1961 law—spanning 500,000+ words and subject to over 4,000 amendments—has become unwieldy.

Now, policymakers aim to build a modern tax law—clear, accessible, and equitable—especially for middle-class taxpayers, MSMEs, and small businesses. The focus is on:

• Reducing complexity
• Strengthening transparency
• Enhancing taxpayer convenience
• Reducing litigation and ambiguities.

Parliamentary Affairs Minister Kiren Rijiju confirmed that, while amendments have been incorporated, the bill still retains the core intent of simplifying tax laws and modernizing compliance for the digital age.

4. What to Expect After August 11

On August 11, Parliament will see the updated bill that includes all key revisions. If passed, this will lay the legal foundation for a simplified, taxpayer-centric income tax structure in India. It could redefine how personal, business, and property incomes are taxed going forward.