[BREAKING] Central Govt withdraws Proposed Income Tax Bill, 2025: Know Why

In a surprising move leaving taxpayers and businesses talking, the Central Government has withdrawn the much-awaited Income Tax Bill, 2025. Finance Minister NirmalaSitharaman announced the decision today, saying the bill will be redrafted before it makes a comeback in Parliament.

The bill, which aimed to replace the over six-decade-old Income Tax Act, 1961, was introduced in the Lok Sabha on 13 February 2025 and sent straight to the Select Committee for scrutiny. After months of study, the Committee submitted its report on 21 July 2025 and the government accepted almost all of its recommendations.

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So, why the U-turn? Turns out, even after the Committee’s report, the government kept receiving fresh suggestions from tax experts, industry players, and legal minds. Many pointed out that the draft needed fine-tuning. Things like better wording, fixing cross-references, and making sure that no room is left for confusion in how the law is applied.

For now, it’s status quo, the old Income Tax Act stays. But the withdrawal signals the government’s intention to get things right the first time, instead of pushing through a half-baked law that could lead to legal disputes and confusion, which is indeed a welcome move given the past experiences from the bitter-sweet implementation of the Goods and Services Tax Act (GST Act).

Also Read: It Took 60,000 Man Hours to Draft the New Income TaxBill: FM Nirmala Sitharaman

Most of the Select Committee’s recommendations made the cut. Additional suggestions came in after the report, demanding attention with Corrections in drafting and requirement of cross-references, the goal being a watertight law with zero ambiguity.

Political observers see this as a sign the government is taking a more consultative and cautious approach. “It’s like rewriting the playbook before the big game—make sure the rules are clear before you start,” one analyst said.

Economists believe the revised bill could bring simpler compliance rules, clearer definitions, and modern tax provisions suited for today’s digital economy.

While some may be disappointed at the delay, many agree it’s better to wait for a strong, clean, and future-ready tax law than to rush through a flawed one.

For now, taxpayers can breathe easy, nothing changes immediately. But when the bill returns, it could reshape the way India handles income tax for decades to come.

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