Budget 2025: Union Finance Minister Nirmala Sitharaman is expected to unveil the Direct Tax Code 2025, the simplified version of the income tax laws, in the Union Budget 2025-26, likely to be presented on February 1. The Direct Tax Code is being brought in to replace the Income Tax Act, 1961.
The Direct Tax Code (DTC) is expected to entirely revamp the income tax regulations, which will result in easing of legal hurdles and reducing the litigation burden for individuals, the government and the industry, according to tax experts.
With a focus on simplifying tax laws and cutting compliance burdens, the DTC 2025 may bring significant relief for middle-class taxpayers, experts feel.
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Key provisions are expected to include streamlined tax regimes, fewer slabs, and reduced complexities, benefiting individuals with annual incomes between Rs 5 lakh and Rs 15 lakh.
Simplifying India’s tax framework
Niyati Shah, Vertical Head – Personal Tax, 1 Finance, emphasises on the pressing need for reform, pointing out that the Income Tax Act, 1961, despite numerous amendments, has become “bulky and less effective, creating challenges for taxpayers and administrators alike”. She highlighted that the DTC 2025 aims to “simplify the tax framework, reduce compliance burdens, and align tax laws with other regulations.”
Also read: Budget 2025: Trade unions seek hike in I-T exemption limit to Rs 10 lakh
For individual taxpayers, Shah outlined several key benefits:
Streamlined tax rates and filing processes: “For individual taxpayers, the DTC promises a unified and rationalized tax structure, simplified tax rates, and a more streamlined filing process.”
Clarity in residential status: The categorization will be limited to “Resident” and “Non-resident,” removing the complexities of multiple residential categories like R-OR and R-NOR.
Rationalized tax regime for middle-income earners: “Those with annual incomes between Rs 5 lakh and Rs 15 lakh stand to benefit from the DTC 2025.”
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