New Delhi, Aug 8 : The Income Tax Bill, 2025, which was introduced in the Lok Sabha on February 13 to replace the existing Income Tax Act, 1961, has been formally withdrawn, sources said on Friday.

A new version of the Income Tax Bill, incorporating most of the recommendations made by the Select Committee chaired by BJP MP Baijayant Jay Panda, will be introduced in Parliament on Monday, according to people in the know.

To avoid confusion by multiple versions of the Bill and to provide a clear and updated version with all the changes incorporated, the new version of the Income Tax Bill will be introduced for the consideration of the House.

According to Panda, who chaired the Parliamentary Select Committee responsible for reviewing the legislation, the new law, once passed, will simplify India's decades-old tax structure, cut down legal confusion, and help individual taxpayers and MSMEs avoid unnecessary litigation.

"The current Income Tax Act of 1961 has undergone more than 4,000 amendments and contains over 5 lakh words. It has become too complex. The new bill simplifies that by nearly 50 per cent -- making it far easier for ordinary taxpayers to read and understand," Panda told IANS recently.

He further stated that the greatest beneficiaries of this simplification would be small business owners and MSMEs who often lack the legal and financial expertise to navigate complicated tax structures.

The new measures will play a significant role in creating a fair and equitable system of direct taxation that ensures no additional burden of direct taxes on the working and middle-class population of the country.

Slabs and rates have been changed across the board to benefit all taxpayers. The new structure substantially reduces the taxes of the middle class and leaves more money in their hands, boosting household consumption, savings and investment, according to the government.

The Finance Act, 2025, has increased the income threshold for claiming a tax rebate under section 87A of the Income Tax Act, 1961 for resident individual taxable under the new tax regime under section 115 BAC of the Act from Rs 7 lakh to Rs 12 lakh, and the maximum rebate amount has been raised from Rs 25,000 to Rs 60,000.

Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs 12,00,000, as per the Finance Ministry. The new income tax bill will make filing taxes easier for common citizens and small businesses.

/IANS