The Income Tax Bill, 2025, introduced in the Lok Sabha on February 13, 2025, to replace the Income Tax Act, 1961, was withdrawn on August 8, 2025, due to drafting errors and ambiguities identified by the Select Committee chaired by BJP MP Baijayant Panda. A revised version, the Income Tax (No. 2) Bill, 2025 (Bill No. 104), was presented in the Lok Sabha on August 11, 2025, incorporating 285 recommendations from the committee to enhance clarity, simplify compliance, and modernize India’s direct tax framework. And, the Lok Sabha passed the Income Tax Bill (No. 2) 2025, a significant legislation replacing the 63-year-old income tax law for individuals and corporations, in just three minutes without any debate.
Key Highlights of the Income Tax (No. 2) Bill, 2025:
1. Simplified Language: Clear, concise tax laws for easier understanding.
2. Fewer Sections: Reduces from over 800 (including sub-sections) to 536 sections across 23 chapters.
3. Consolidated Deductions: Groups deductions to ease tax filing.
4. Lower Penalties: Reduced penalties for minor offenses.
5. Unchanged Tax Rates: Maintains existing slabs, capital gains, and deadlines.
6. Trust-First Policy: Encourages voluntary compliance with less scrutiny.
7. Modernized Administration: Enhances CBDT powers with digital tools.
8. Tax Year Concept: Replaces financial/assessment year for clarity.
9. Removed Obsolete Provisions: Eliminates over 300 outdated rules.
10. Structured Format: Uses tables and formulas for clarity.
11. Vacant Property Fix: Drops higher taxes on vacant properties.
12. House Property Deductions: Clarifies 30% deduction post-municipal taxes; extends pre-construction interest to let-out properties.
13. Commuted Pension Equity: Deductions for non-employees under “Income from Other Sources.”
14. Commercial Property Clarity: Excludes idle commercial properties from house property taxation.
15. GAAR Refinement: Balances anti-avoidance rules with fairness.
16. Digital Device Access: Clarifies access in undisclosed foreign income cases, addressing privacy.
17. Reduced Litigation: Clearer rules to minimize disputes.
18. MSME-Friendly: Simplifies compliance for small businesses.
19. Middle-Class Relief: Raises Section 87A rebate threshold from ₹7 lakh to ₹12 lakh.
20. Marginal Relief: Eases tax burden for incomes slightly above ₹12 lakh.
21. S.I.M.P.L.E Framework: Streamlined, integrated, transparent, and efficient tax system.
22. No New Powers: Clarifies existing court-approved powers for digital access.
23. Enhanced Services: Introduces digital tools for better compliance.
24. Stakeholder Input: Reflects 285 committee recommendations.
25. April 2026 Rollout: Implementation starts April 2026.
Link of Bill for further Analysis:
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