Modified Income Tax Bill 2025 passed in Lok Sabha: Here's all you need to know

Lok Sabha on Monday passed modified Income Tax Bill in the Lok Sabha. The modified Income Tax Bill, introduced by Union Finance Minister Nirmala Sitharaman, incorporates most of the recommendations made by the Select Committee, chaired by BJP MP Baijayant Jay Panda. The Select Committee had made 285 suggestions to the Income Tax Bill.

Introducing The Income-Tax (No.2) Bill, 2025, Sitharaman said the bill seeks to consolidate and amend the law relating to income tax and will replace the Income Tax Act, 1961.

"Almost all of the recommendations of the Select Committee have been accepted by the government. In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately," said the statement of objects and reasons of the bill. In February, while presenting the first draft of the bill, Finance Minister Sitharaman introduced an acronym to outline its core principles. Those principles are: 'Streamlined structure and language; Integrated and concise; Minimised litigation; Practical and transparent; Learn and adapt, and Efficient tax reforms'.

Government Withdraws Income Tax Bill, 2025

Earlier on Friday, Sitharaman withdrew the Income Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 to replace the existing Income Tax Act, 1961.

New Income Tax Bill 2025 

The Income-Tax Bill 2025 — that was tabled in Parliament by Finance Minister Nirmala Sitharaman in February — was billed as the most significant overhaul of India’s direct tax law in more than 60 years. The new bill aimed to replace the 298-section Income-Tax Act, 1961 with a modern, taxpayer-friendly law written in simpler language, about 50% shorter than the current statute.

• In the Income Tax Bill bill, the Select Committee suggested two important changes for citizens earning income from their house properties.
• First, the 30 per cent standard deduction, which is already allowed after municipal tax deductions, should be clearly mentioned in the revised Income Tax Bill law.
• Moreover, the benefit of home loan interest deductions, which are now available only for self-occupied properties, should also be extended to rented properties.
• These suggestions will make it easier for middle-class homeowners and those investing in property for rental income.
• Several taxpayers face long delays to get refunds for TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). In this regard, the committee wants the refund process to be quicker, easier, and more transparent.
• The CBDT (Central Board of Direct Taxes) earlier said that new rules are being drafted under a policy called “Enforcement with Empathy,” aiming to reduce hassles for honest taxpayers.

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With PTI inputs