Budget 2025:Nirmala Sitharaman to Announce New Income Tax Bill

According to Finance Minister Nirmala Sitharaman, who presented the Union Budget 2025, a new income tax bill—a direct tax code designed to make compliance easier for individual taxpayers—will be introduced the following week.

Filing returns and calculating taxes should be made easier by the new code. The government is expected, among several other things, to do away with the idea of a financial year (FY) as opposed to an accounting year (AY).

current new code may be introduced during current parliament session, according to sources on Thursday.

When Ms. Sitharaman released the entire 2024–2025 budget in July, there was talk of a new direct tax code. She stated that the goal was to make the current income tax rules easier to understand and read, and to cut the I-T Act of 1961’s page number by an astounding 60%.

With 23 chapters and 298 sections, the 1961 Act covers the imposition of direct taxes, such as personal and corporate taxes, as well as those related to wealth, gifts, and securities transactions.

The Central Board of Direct Taxes, or CBDT, established an internal committee to oversee the evaluation prior to Ms. Sitharaman’s announcement of the I-T Act revision. This committee included the creation of 22 specialized subcommittees to assess various aspects of the previous law.

Additionally, the center asked the general public, including stakeholders and subject matter experts, to submit their opinions and suggestions in October. About 7,000 were received by January.

What Sets It Different From the IT Act?

The Direct Tax Code aims to streamline tax rules and cut down on page count because the Income Tax Act of 1961 has been complicated by several revisions over the years. There are 23 chapters and 298 sections in the 1961 statute. It is believed that the DTC will drastically reduce this.

Probably the most significant change was the elimination of the concept of the accounting year (AY) and financial year (FY), which frequently caused misunderstandings. Additionally, it might impose taxes on LIC policy income, which was exempt from the 1961 statute, at a rate of 5%.

The DTC could allow company secretaries and cost management accountants to do tax audits, which were previously restricted to chartered accountants under the 1961 law.

Dividend income taxes, which are currently levied at slab rates, might be standardized at 15%. In addition to the 30% tax slab, the variable surcharge may be replaced by a standardized tax rate of 35% for high incomes as well.

Differences in how capital gains are taxed across various asset classes may also be removed.

The choice between two tax regimes might not be offered by the DTC. According to the new regime, deductions and exemptions may also be cut.