FM Sitharaman tables modified Income Tax Bill, 2025, in Lok Sabha

Union Finance Minister Nirmala Sitharaman has introduced the modified Income Tax (No. 2) Bill, 2025, in the Lok Sabha, after withdrawing the earlier version of the Income Tax, 2025, last week. The latest version of the new Income Tax Bill has been tabled, incorporating most of the recommendations made by the Select Committee, as well as drafting corrections and suggestions from other stakeholders. The new bill, which will replace the Income Tax Act, 1961, will also amend the Finance Act, 2025.

The new Income Tax Bill, incorporating most of the recommendations made by the Select Committee chaired by Baijayant Panda, aims to eliminate confusion caused by multiple versions of the Bill. Last week, Fortune India reported that the latest version, which will be introduced for the consideration of the House, will provide a clear and updated version with all changes incorporated.

Commenting on the development, Dinesh Kanabar, CEO, Dhruva Advisors, said there were a number of provisions against which representations were made to select committee, which have been accepted in the Bill presented today. "To give a few examples, the provisions of levying Alternate Minimum Tax on LLPs has been done away with, the rigours placed on Charitable Trust have been removed, the provisions of Transfer Pricing and the definition of Associated Enterprise to whom these provisions apply, have been relaxed. A set of very welcome changes. Glad that the representations to the Select Committee have borne fruit," he said.

The proposals relating to tax benefits for investment by foreign pension funds and sovereign funds in the infrastructure sector are similar to the existing tax law though the provisions have been drafted in a more structured and concise manner, says Rajesh Gandhi, Partner, Deloitte India. "The government could have considered industry suggestions while drafting the proposals including extension of tax benefits to holding companies setup prior to 2021, allowing reinvestment of dividend income within the group without triggering double taxation of dividend income, extension of tax exemption to indirect share transfers, extension of tax benefit to capital gains from unlisted bonds or debentures as well as removal of withholding tax on exempt income earned by such funds."

The Select Committee of Parliament, led by BJP leader Baijayant Panda, tabled its report on the Income Tax Bill, 2025, on the first day of the ongoing monsoon session of Parliament. The Committee, comprising 31 members of the Lok Sabha, was tasked with examining the Bill.

As announced in Budget 2025, Finance Minister Nirmala Sitharaman tabled the Income Tax Bill, 2025, in the Lok Sabha on February 13. The Bill aims at simplifying the income tax law, repealing the Income Tax Act, 1961. The new act will come into force from April 1, 2026.

These are among the 31 major recommendations made by the Select Committee. The panel has made a total of 285 suggestions to simplify the bill further.