New Delhi: Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025, announced that a new Income Tax Bill, aimed at simplifying tax compliance and reducing litigation, will be introduced in Parliament next week.
What is the New Direct Tax Code (DTC)?
The proposed Direct Tax Code (DTC) seeks to replace the Income Tax Act of 1961 by:
Reducing complexity and making tax laws simpler to understand
Lowering tax litigation
Cutting down the number of sections in the current 298-section tax law
Key Changes Expected in the New Tax Code
Elimination of Confusing Financial and Assessment Years
•The DTC may remove the concept of Financial Year (FY) and Assessment Year (AY) to avoid confusion.
Taxation on LIC Policies
•5% tax may be levied on income from LIC policies, which was earlier tax-free under the 1961 Act.
Who Can Perform Tax Audits?
•Unlike the current law, where only Chartered Accountants (CAs) can perform tax audits, the DTC may allow:
Company Secretaries (CS)
Cost Management Accountants (CMAs)
Revised Dividend Tax Rates
•Dividend income, currently taxed at slab rates, may now have a flat 15% tax.
Higher Tax Rates for High Earners
•The current variable surcharge (on 30% slab) may be replaced with a fixed 35% tax rate for high earners.
Capital Gains Tax Simplification
•The DTC may remove variations in taxation on different asset classes and standardize capital gains tax rules.
Changes in the Tax Regime System
•The option to choose between the old and new tax regime may no longer be available.
•Deductions and exemptions may be reduced to align with the new tax regime.
Public & Expert Consultations
•Over 7,000 suggestions were received from taxpayers, experts, and stakeholders during the drafting process.
•The CBDT (Central Board of Direct Taxes) formed 22 specialized committees to review and suggest changes.
The new Direct Tax Code is expected to be a landmark reform in India’s taxation system.
Stay tuned to The Pragathi News for the latest updates on Budget 2025!
