The objective of this revised tax code is to simplify the existing tax structure, increase transparency, and simplify the provisions of the law for both individual taxpayers and businesses.
Central government has started preparations to present its next Union Budget on February 1, 2025. In such a situation, the Central Board of Direct Taxes (CBDT) has very little time left to prepare a simplified version of the income tax laws. The department has a lot of work at the moment regarding this.
Sources have told CNBC-TV18 that the ongoing comprehensive review of direct tax laws is likely to focus on reducing legal hurdles as well as reducing the litigation burden for both the government and the industry. Sources said, “Under the review, the Revenue Department is currently focusing only on simplifying the language and it is not in favor of any change in tax rates.” What is the government going to do?
Sources also said that “some penalty provisions are also going to be simplified in the review of the existing Income Tax Act, 1961. Along with reducing litigation, it will also focus on overall litigation management.” The Central Board of Direct Taxes (CBDT), which is responsible for making and implementing income tax laws in the country, is working on this review. For this, an internal panel was formed under the aegis of the Revenue Department of the Finance Ministry, which is doing a comprehensive review of the Income Tax Act of 1961.
Convenience for income tax officials too
Sources said, “The panel is working on clarifying the provisions of the law by making simple interpretations. It is believed that this will make it easier for taxpayers as well as income tax officials.” Sources said. “Whether the review will be introduced in the form of a new act or it will be taken forward only through amendments, the government has not yet decided on this,”
Further sources indicated that “under the review, major relaxation can be given in the provisions of TDS, TCS, capital gains, issues like tax payer classification, income source can be clarified better.” The government wants to include the points and proposals that have come out of this review of direct tax law in the Budget 2025 to be released in February.
A lot of interest among the people
Talking about the review, Akhil Chandna, partner, direct tax at Grant Thornton India, says, “The new Direct Tax Code 2025 is expected to be released in the upcoming budget in India. This is a development that has generated a lot of curiosity and interest among people.
The aim of this revised tax code is to simplify the existing tax structure, increase transparency, and simplify the provisions of the law for both individual taxpayers and businesses.
Its primary goal is to reduce the complexity of tax laws, thereby curbing tax evasion and promoting law compliance. Some of the major changes introduced in the Direct Tax Code include – simplifying the return filing process by reducing the number of sections and including more schedules, simplifying the tax payer classification for residents and non-residents, eliminating categories such as ROR and RNOR, eliminating most deductions and exemptions to plug loopholes and create a fairer tax system, expanding the scope of deduction and collection at source (TDS/TCS) to cover almost all income types.
Tax on Capital Gains
Along with this, to promote regular tax payment and reduce tax evasion, capital gains are taxed as regular income. This may increase taxes for some people, but it will ensure uniform tax treatment for all types of income.
Apart from this, the review also includes things like eliminating the concepts of “assessment year” and “previous year” and using only the term “financial year” for tax filing, renaming income categories for clarity. Overall, the new Direct Tax Code is being seen as a positive step towards creating a more efficient and transparent tax system in India. It shows the government’s intention to change the tax structure to better match the needs of the modern economy, promote growth and make a fair distribution of the tax burden.
