Income Tax Slab, Budget 2025 LIVE Updates: Finance Minister Nirmala Sitharaman on Saturday said that she would introduce New Income tax bill next week. She added that she would update on indirect taxes under the new bill.
Though she didn't share any other update, the new income tax bill is expected to be modelled on the Direct Tax Code. The new tax bill is proposed to make tax compliance easier for taxpayers and make the Income Tax Act easier to read and understand.
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"The new income tax bill is designed to be clear and direct in its language, ensuring simplicity and ease of understanding for both taxpayers and tax administrators. Its straightforward text aims to eliminate confusion, making it more accessible and user-friendly for all stakeholders involved," FM Sitharaman said in the Parliament.
The Direct Tax Code aims to streamline income tax laws, simplifying them and minimizing legal issues and disputes for individuals, the government, and the industry. FM Sitharaman's speech last Budget hinted at this new tax law when she said the goal was to simplify the income tax laws and cut the Income Tax Act, 1961's page-count by as much as 60 per cent.
CA (Dr.) Suresh Surana said: “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.”
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Changes with Direct Tax Code
The Direct Tax Code (DTC) will streamline the current Income Tax Act by reducing the number of sections and chapters, eliminating outdated provisions, and simplifying the language. The goal is to make the law more accessible and easier to comprehend for both taxpayers and professionals.
Currently, the Income Tax Act, 1961, contains 298 sections spread across 23 chapters, covering various tax areas such as personal income tax, corporate tax, and securities transaction tax. The revised DTC is anticipated to be more concise and transparent, making it easier for individuals to navigate and understand the tax regulations.
The upcoming 2025 Budget will likely introduce notable amendments to the Income Tax Act with the aim of streamlining the tax process.
Anticipated changes include replacing intricate income calculation methods with easily understandable formulas and potentially consolidating the terms "assessment year" and "financial year" into a singular "tax year" definition.
Moreover, to enhance taxpayer convenience, there are plans to decrease the number of supplementary forms necessary for tax returns, making these forms accessible online.
The taxation system on dividend income may be simplified by standardizing the tax rate at 15% across all income brackets. Similarly, high earners may see a standard tax rate of 35% in place of the variable surcharge currently imposed on top of the existing 30% tax slab.
Surana added: "The current Income Tax Act is laden with numerous exemptions and deductions, making it complex and challenging to navigate. The DTC is expected to simplify the tax framework by eliminating exemptions and deductions altogether and bring down the overall tax rates. This approach aligns with the government's vision of creating a simplified tax regime."
To streamline the taxation on capital gains, the differences in tax treatment across various asset classes may be eliminated.
Under the proposed Direct Tax Code (DTC), taxpayers may not have the option to choose between different tax regimes. Additionally, deductions and exemptions could be reduced in line with the new regime.
The focus of the new tax code will be on promoting digital compliance, moving away from the traditional compliance methods prevalent under the current 1961 Act.
Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India - a tax consulting firm, said: "There is a need to simplify resident status determination rules. There are multiple conditions and look-back provisions that go into the past 10 years. It is a meticulous task for an individual to determine his Indian residential status as there are multiple provisions affecting the same."