Income Tax Act: Is the Finance Minister making these modifications to streamline the Direct Tax Code? Check for best details.

Income Tax: Hearing the term “income tax” makes one think of taxes, refunds, deductions, and, most importantly, its complicated vocabulary. To address the common man’s tax-related concerns, plans are being made to change the requirements of the Income Tax Act of 1961. Finance Minister Nirmala Sitharaman has recommended that the Direct Tax Code be made available in simple and understandable English for the general public in order to eliminate legal conflicts through clear rules and consistent tax rates.

Although negotiations have been ongoing since 2009, the new Direct Tax Code is expected to be implemented during the 2025 budget.

Here are some of the significant modifications that will be made for Income Tax

• Taxpayer identification will be made simpler: taxpayers will be classed as either residents or non-residents. Confusing words are being eliminated, including ROR (resident and ordinarily resident), RNOR (resident but not ordinarily resident), and NR (non-resident).
• Confusion throughout the year will come to an end. The words “assessment year” and “previous year” have been dropped from the code. Filing returns will only be applicable during the fiscal year.
• The gains from capital investments will be taxable as regular income. This may result in greater taxes for some people, but it will also guarantee that all sources of income are taxed equally. Short-term gains from financial assets will be taxed at 20% (up from 15%), while long-term gains will be taxed at 12.5% (down from 20%).
• Salary money will now be referred to as employment income, rather than salaried income. money from other sources has been renamed as income from other sources.

• The number of persons assisting with income tax filing will increase: CAs, CSs, and CMAs may now be able to perform tax audits, which were previously confined to chartered accountants, making audits of taxes more accessible.
• Uniform tax rate for businesses: Domestic and foreign companies will now pay the same tax rate, making conformity easier and encouraging foreign investment.
• TDS and TCS on all categories of income: The new tax system will apply to practically all sorts of income, including tax deduction at source (TDS) and tax collection at source (TCS). This ensures that taxes are paid on time and helps to avoid tax evasion. The TDS rate for many payments will be decreased from 5% to 2%. The TDS rate for e-commerce firms would be decreased from 1% to 0.1%, giving taxpayer relief and simplifying e-commerce compliance.
• Most deductions and exemptions will be eliminated, making it easier to complete tax returns. This will improve the tax system’s fairness and transparency. In the new salaried tax regime, employees’ standard deduction has raised by 50% to ₹ 75,000.

Goals of Direct Tax Code 2025

• Simplify tax rules to make them easier to grasp.
• Increase the percentage of taxpayers from 1% to 7.5%.
• Make it easy for individuals to comply with tax requirements.
• Clear tax regulations can help reduce legal issues.

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