The Indian government is introducing a new Direct Tax Code in 2025 to simplify and update the existing income tax laws. Here’s a summary of the key changes:
Overall Structure and Goals:
- Simplification: The new code aims to make tax laws easier to understand and comply with by using clearer language and reducing the number of sections and schedules.
- Reduced Litigation: The goal is to minimize disputes by clarifying provisions and streamlining processes.
- Modernization: The code seeks to incorporate current best practices and address issues that have arisen since the Income Tax Act of 1961 was enacted.
Specific Changes:
- Terminology: Terms like “Assessment Year” and “Previous Year” are replaced with “Financial Year” to simplify the tax year concept.
- Residence Rules: The “Resident but Not Ordinarily Resident” category is removed, simplifying the classification of residents and non-residents.
- Capital Gains: Capital gains will be taxed as regular income, with short-term gains taxed at 20% and long-term gains at 12.5%.
- Income Categories: “Income from Salary” is renamed “Employment Income,” and “Income from Other Sources” becomes “Income from Residuary Sources.
- TDS and TCS: Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) will be applied more broadly, but TDS rates for many payments will be reduced.
- Audit Roles: Company Secretaries and Cost and Management Accountants may be allowed to conduct tax audits in addition to Chartered Accountants.
- Deductions and Exemptions: Many tax exemptions and deductions will be eliminated to streamline tax filing.
- Standard Deduction: The standard deduction for salaried employees in the new tax regime has been increased to Rs 75,000.
- Tax Slabs: There may be changes to the income tax slabs, with potential increases in the basic exemption limit and adjustments to the tax rates at various income levels.
Potential Impacts:
- Increased Compliance: The simplification of the tax code may encourage better compliance.
- Reduced Burden: Streamlined processes and clearer rules could reduce the burden on taxpayers.
- Changes in Tax Liability: Depending on individual circumstances, some taxpayers may see changes in their tax liability due to the revised rules and slabs.
Important Note: The new Direct Tax Code is still under development, and some details may change before it is finalized and implemented. It’s advisable to stay updated on the latest news and information from official sources.
The new Income-Tax Bill, 2025 has been introduced today in the Lok Sabha.
Learn more about-
✅The journey of the new Income-Tax Bill
✅The need and objectives for reviewing of I.T. Act 1961
✅The aim and scope of the Bill
✅The examples of simplification proposed
and more…..
