Finance Minister Nirmala Sitharaman introduced the modified Income Tax Bill in the Lok Sabha on August 11. 

Why the govt introduces new Bill?

• The Income Tax Act passed in 1961 has been subjected to numerous amendments since its passage. 

• As a result of these amendments, the basic structure of the Income Tax Act has been overburdened and language has become complex, increasing compliance for taxpayers and hampering efficiency of tax administration. 

• Taxpayers, practitioners and tax administrators have also raised concerns about the complicated provisions and structure of the Income Tax Act.

• Therefore, in the Union Budget in July 2024, the government announced that a time bound comprehensive review of the Income Tax Act, 1961 would be undertaken to make the Act concise, lucid, easy to read and understand.

• The government had introduced the Income Tax Bill, 2025 in the Lok Sabha on February 13, 2025 and it was referred to the Select Committee for examination.

• The Select Committee laid its report in the Lok Sabha on July 21, 2025. 

• 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. 

• 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. 

• Consequently, Income Tax (No. 2) Bill, 2025 has been prepared to replace the Income Tax Act, 1961.

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