Big news for income tax payers. It’s time to end your fear over income tax. Because the central government is going to bring big rules in this regard from the new year, i.e., 2025. According to sources, the Center will do a big job to provide relief to the common man. Preparations are underway to make changes in the provisions of the Income Tax Act 1961 to remove these problems related to tax laws of the common man. Finance Minister Nirmala Sitharaman had directed to bring the Direct Tax Code (DTC) in simple and easy language for the common people so that legal disputes can be reduced by simple legislation and consistent tax rates.
Although discussions have been going on since 2009, the new Direct Tax Code 2025 is likely to be introduced at the time of the budget. Here are some of the major changes that are coming:
Taxpayer identification will be simple
Taxpayers will be classified as resident or non-resident. The misleading terms associated with this are being removed, which will eliminate the ROR (resident and ordinarily resident), RNOR (resident but not ordinarily resident), and NR (non-resident) categories.
Confusion over the year
The words assessment year and previous year have been omitted in the code. Only the word financial year will be applicable for filing returns.
Capital gains to be treated as regular income
Capital gains will be taxed as regular income. This may mean that taxes will be higher for some people, but it will ensure that all types of income will be taxed equally. Short-term gains on financial assets will be taxed at 20% (above 15%), while long-term gains will be taxed at 12.5% (below 20%).
No more salary income Now say income from employment
Income from salary will now be called employment income, and income from other sources has been renamed income from other sources.
Income tax payers will increase
CAs, CSs, and CMAs may now be allowed to conduct tax audits, which were earlier limited to chartered accountants, making tax audits more accessible.
Uniform tax rate for companies
Both domestic and foreign companies will now pay the same tax rate, making compliance easier and promoting foreign investment.
TDS and TCS on all types of income
Under the new tax system, tax deduction at source (TDS) and tax collection at source (TCS) will be applicable to almost all types of income. This will ensure that taxes are paid regularly and will help curb tax evasion. The TDS rate for multiple payments will be reduced from 5% to 2%. For e-commerce operators, the TDS rate will be reduced from 1% to 0.1%, providing relief to taxpayers and making compliance simple for e-commerce businesses.
Most deductions and exemptions will be discharged
Most deductions and exemptions will be removed, making it easier to file tax returns. This will make the tax system more fair and transparent. However, the standard deduction for salaried tax regime employees in the new has increased by 50% to ₹75,000.
Objectives of the Direct Tax Code-2025
1. Simplify tax rules so that they are easy to understand.
2. Increase the number of taxpayers from 1% of the population to 7.5%.
3. Making it easier for people to comply with tax regulations
4. Reducing legal disputes with clear tax laws.