The Lok Sabha on August 11 passed the Taxation Laws (Amendment) Bill, 2025, which was tabled by by finance minister Nirmala Sitharaman earlier in the day and aims to aims to replace the 63-year-old direct tax framework.
The legislation superseded the draft introduced on February 13, which was withdrawn on August 8 to prevent confusion arising out of multiple versions. The original draft was referred to the Select Committee immediately after its introduction in February. The government decided to withdraw that bill to ensure that the final version carried the approved changes in a single, updated text.
The revised bill was tabled in the house by Sitharaman, incorporating most of the 285 recommendations made by the Parliamentary Select Committee chaired by BJP MP Baijayant Panda. Parliamentary affairs minister Kiren Rijiju said on August 9 that while the essence of the original draft had been retained, the revised version reflected significant refinements to simplify compliance, improve clarity and protect taxpayer rights.
The panel, which submitted its report on July 21, focused on simplifying the draft legislation’s language, removing redundancies, and improving procedural clarity. Other changes included drafting adjustments, phrase alignment, consequential amendments, and cross-referencing corrections.
Implementation from April 2026
Once enacted, the new law will come into effect from April 1, 2026, replacing the Income Tax Act, 1961, which has been in force since April 1, 1962.
Over the decades, the 1961 Act has undergone 65 amendments, with more than 4,000 changes to its provisions. The new framework is expected to streamline processes, enhance taxpayer experience, and reduce litigation, without granting additional powers beyond those in the current law.
On search and seizure about access to digital information, the law remains the same as it was in the IT Act, 1961, Panda had said earlier.
The revised bill retains the exemption for anonymous donations to religious-cum-charitable trusts. However, where such trusts also carry out other charitable activities such as running educational institutions or hospitals, the anonymous donations will not be exempt from tax. This provision mirrors the recommendations of the Select Committee.
The new legislation is positioned as a modernised tax code with simplified language, structured processes, and a reduced scope for disputes, aligning with the government’s broader agenda of easing compliance for taxpayers.
The bill now heads to the Rajya Sabha. Once passed by the upper house, it will become law after President Droupadi Murmu gives her assent.
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