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NRIPage | Articles | Direct Tax Code to Be Introduced Separately, Not with Union Budget 2025 | Get Latest International News & Updates. Your Source for World Events and Updates - NRI Page
DTC to Be Introduced Separately:
Sources have confirmed that the much-anticipated Direct Tax Code (DTC), which seeks to simplify India’s income tax laws, will be introduced separately and not as part of the Union Budget 2025. Finance Minister Nirmala Sitharaman is expected to deliver the budget speech on Saturday, but the new tax code will be presented at a later date. This move marks a shift from earlier reports suggesting the DTC would be included with the budget.
Background on the Direct Tax Code:
The DTC was first mentioned during the full 2024/25 budget presentation in July, where Finance Minister Sitharaman stated that the aim of the new code is to make income tax laws easier to read and understand. The government’s goal is to reduce the size of the I-T Act of 1961 by 60%, making it more accessible for individual taxpayers. The current I-T Act consists of 23 chapters and 298 sections, covering various aspects of direct taxes, including personal and corporate tax, securities transactions, gifts, and wealth taxes.
Key Changes Expected in the DTC:
Some of the biggest changes anticipated under the new DTC include the simplification of tax calculations and return filing processes. One of the most notable shifts will be the scrapping of the concept of the financial year (FY) in favor of a more straightforward accounting year (AY). Additionally, income from mutual funds and investments in the Life Insurance Corporation of India (LIC), which are currently tax-exempt, will likely be taxed at a flat rate of 5%. There is also speculation that a flat 15% tax will be introduced on dividends earned, replacing the current taxation structure.
Public Feedback and Consultation Process:
Before the introduction of the DTC, the Central Board of Direct Taxes (CBDT) set up an internal committee to review and overhaul the I-T Act. This included the creation of 22 specialized sub-committees to evaluate various aspects of the existing law. Additionally, the government reached out to the public, inviting feedback from stakeholders and subject experts. By January, the authorities had received around 7,000 submissions, which will likely inform the final structure of the Direct Tax Code.
Timeline and Future Developments:
While the new tax code is expected to be introduced in the coming Parliament session, the Union Budget 2025 will not include its reading. The focus of the upcoming budget will be on other financial matters, while the DTC will be addressed separately. With the consultation process complete, the government will move ahead with finalizing the DTC, which aims to simplify and modernize the country’s tax system.
