Budget 2025: Finance Minister Nirmala Sitharaman will present the second full-fledged budget of the Modi 3.0 government on February 1. The upcoming Union Budget 2025-26 is being eagerly anticipated, with the middle class hoping for significant tax reliefs.
Amidst all these expectations around the budget, reports are suggesting that the Centre may introduce the Direct Tax Code (DTC) 2025, a simplified version of the income tax laws soon. The DTC will be brought to replace the Income Tax Act, 1961.
The Direct Tax Code will overhaul the income tax laws, making them simpler and reducing legal complications and litigation for individuals, the government, and the industry.
Experts also cautioned that such significant reforms should not be rushed. They also recommend following a proper process, including releasing a draft and conducting public consultations. The changes may begin in stages through the upcoming budget and continue to evolve in the following months, they believe.
According to CA (Dr.) Suresh Surana, “The government may unveil a comprehensive overhaul of the income tax framework by introducing a new Direct Tax Code. This proposed system aims to simplify the tax structure, promote compliance, and align India’s tax policies with global standards.”
Also read: Budget 2025: Old Tax Regime to be completely scrapped?
What will change after DTC implementation?
The DTC will reduce the number of sections and chapters in the current Income Tax Act, remove outdated provisions, and simplify the language, aiming to make the law easier for both taxpayers and professionals to understand and follow.
The Income Tax Act, 1961, consists of 298 sections across 23 chapters, covering areas like personal income tax, corporate tax, and securities transaction tax. The new version of the Direct Tax Code is expected to be much shorter and clearer, streamlining these provisions for better understanding.
FM Sitharaman, in the Union Budget 2024, had proposed to revamp the Income Tax Act, 1961, to make it concise and easier to understand.
The 2025 Budget is expected to bring significant changes to the Income Tax Act to simplify the tax process. Complex income computation methods may be replaced with clear formulas, while the terms “assessment year” and “financial year” could be unified under a single “tax year” definition.
To make tax filing more convenient,
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