During the Budget Speech on July 23, 2024, the Indian Finance Minister announced that a comprehensive review of the Income-tax Act, 1961 would be undertaken. She explained that the rationale behind such a move was to make the Act concise, clear and easier to read and understand. The aim and purpose were to reduce disputes and litigation. She also announced that the review would be completed in six months.
The Income-Tax Bill, 2025 was accordingly presented to the Parliament on February 13, 2025. A brief reference to the above Bill was made in the Foreword to the Special Edition of Corporate Update.
The first draft was referred for detailed examination and recommendations to a Parliament Select Committee (“Committee”). The Committee tabled its report in the Lok Sabha on July 21, 2025.
The Committee made recommendation that the first draft required corrections of drafting errors like cross-referencing errors, alignment of phrases and consequential changes which had critical tax impact to various classes of stakeholders and taxpayers. The Finance Minister accordingly withdrew the first draft on August 8, 2025.
On August 11, 2025, a new version, the Income-Tax (No.2) Bill, 2025 (“New Bill”), incorporating the recommendations of the Committee was introduced and passed by the Lok Sabha on August 11, 2025 and on August 12, 2025, by the Rajya Sabha.
The New Bill was given assent by the President on August 21, 2025 and thus has become law.
The New Income-tax Act will be effective from April 1, 2026.