The Congress party-led coalition, known as the United Progressive Alliance, says it is concerned the Prevention of Terrorism Act (POTA) "has been grossly misused in the past two years".
"There will be no compromise in the fight against terrorism, but given the abuse of POTA that has taken place, the UPA government will repeal it while existing laws are enforced strictly," the coalition said in its governing agenda released on Thursday.
The Prevention of Terrorism Act broadened the scope for the death penalty and gave prosecutors more leeway to detain and interrogate suspects.
Amnesty International had called on Wednesday for the act to be repealed, saying it was responsible for "many violations of human rights".
The anti-terror act was pushed into law in March 2002 by the then Hindu nationalist government in the wake of the 11 September 2001 attacks in the United States and a Kashmiri rebel raid on the Indian parliament.
Critics say the act has been used mostly against the Muslim minority and has allowed state leaders to target their opponents without oversight from the federal government.
The Dravida Munnetra Kazhagam, a party in southern Tamil Nadu state that is allied with the new government, had demanded the end of the act after state leader Jayalalitha Jayaram used the law to jail her opponents.