Parliamentary Select Committee’s Report on the Income Tax Bill 2025 to closely align it with the Income Tax Act, 1961

This Tax Alert summarizes the key changes recommended by the Parliamentary Select Committee (PSC) to the Income Tax Bill 2025 (ITB 2025) through a Report dated 16 July 2025 tabled before Lok Sabha on 21 July 2025. The ITB 2025, introduced in the Lok Sabha on 13 February 2025 ^[1] , seeks to simplify India's income tax law, reduce litigation and eliminate redundant provisions from the currently applicable Income Tax Act, 1961 (ITA 1961). The 4500+ pages Report provides clause-by-clause analysis of the provisions of ITB 2025 with ITA 1961, stakeholder suggestions, views of Ministry of Finance (MOF) as also other Ministries and PSC’s analysis and conclusions by way of recommendations. It also provides an amended version of ITB 2025 (Amended ITB 2025) incorporating majority of recommendations made by PSC.

The primary intent behind most of the PSC recommendations in the Amended ITB 2025 is to harmonize its provisions with the ITA 1961 without any policy change to maintain continuity. The PSC has stated that policy level changes will require a separate exercise. Accordingly, the recommendations are predominantly for addressing drafting anomalies in the ITA 1961 which crept in while attempting to simplify the complex provisions of ITB 2025. This Tax Alert summarizes the key changes in the Amended ITB 2025. Additionally, it also covers some significant suggestions made by stakeholders which were not considered being in the nature of policy changes.

The key contents of the Report are discussed in the Alert under following captions:

• Aligning drafting anomalies in ITB 2025 with ITA 1961 incorporated in Amended ITB 2025
• Drafting anomalies in ITB 2025 recommended to be addressed by PSC but not forming part of Amended ITB 2025. These are expected to be incorporated in the next version of ITB 2025.
• Recommendations of PSC resulting in deviation from ITA 1961 provisions
• Other recommendations
• Significant suggestions from stakeholders not accepted by PSC in view of being policy level issues

The Government may consider the recommendations and is expected to introduce a revised ITB 2025 for approval of Lok Sabha. Once approved, it will be submitted to the Rajya Sabha for approval, followed by presidential assent, leading to enactment into law with effect from 1 April 2026 replacing the ITA 1961.

^[1] Refer EY Tax alert on ITB 2025 [Income Tax Bill 2025: March towards simplification] of February 2025.