Activists have criticised the Lokpal Bill for failing to include the prime minister and senior judiciary within the remit of a new ombudsman.
Activist Anna Hazare has called the bill a "cruel joke". He said he would go on hunger strike from 16 August.
India has recently been hit by a string of high-profile corruption scandals.
Scandal allegations
Activists led by Mr Hazare have been pushing the government for a strong ombudsman who will have the power to investigate corruption charges against the prime minister, senior judges and MPs, among others.
Last Thursday, the government approved a draft of the law which allows citizens to approach the ombudsman with complaints against federal ministers and bureaucrats, who are protected under India’s present anti-corruption laws.
But the campaigners and the main opposition Bharatiya Janata Party (BJP) have criticised the government’s decision to keep the prime minister and senior judges out of the proposed law.
Mr Hazare went on a hunger strike in April to protest against government inaction on corruption.
Some of the recent corruption allegations to have rocked India include a multi-billion dollar telecoms scandal, financial malpractices in connection with the Delhi 2010 Commonwealth Games and the diversion of houses for war widows to civil servants.
Critics of the government say the recent allegations point to a pervasive culture of corruption in Mr Singh’s administration – adding to the difficulties of a politician once seen as India’s most honest.
A recent survey said corruption in India cost billions of dollars and threatened to derail growth.