Government sources said the proposal for the amendment, which is strongly backed by Home Minister P Chidambaram, Jammu and Kashmir Chief Minister Omar Abdullah and several groups in the Northeast, is expected to be placed before the next meeting of the Cabinet Committee on Security (CCS).
Through the amendment, it is being proposed that arrest warrants are secured in advance and grievance cells set up to address citizens' complaints against the armed forces, the sources said.
By amending clause 4 (a) of the controversial Act, the government proposes to abolish the power given to the armed forces which allows them to open fire causing death, they said.
The proposed amendments were submitted before the CCS three months ago but were sent back to Home Ministry for reconsideration following strong opposition from the Defence Ministry. Army says the Act provides it with essential legal protection, a stand backed by Defence Minister A K Antony.
But the Home Ministry, after examination, decided to re-submit the proposed amendment bill to the CCS without any changes. The revised proposal has also incorporated the views of the three interlocutors appointed to find a solution to the Kashmir issue.
AFSPA, often dubbed as "draconian" for the widespread powers it gives to the Army - guarantees that army officers can operate without fear of arrest by civil authorities.
The Defence Ministry's view, however, is that while these amendments are acceptable in a scenario where the army is called in to aid civil authority - for example, in the case of riots and civil unrest - they are too restrictive in Kashmir and the Northeast where the army has to take on well-trained, heavily-armed fighters, they said.
The Home Minister has often been citing the statement made by Prime Minister Manmohan Singh that "he will take steps to replace the AFSPA by a more humane law."
The Second Administrative Reforms Commission has also recommended replacement of AFSPA.