On hearing the name of income tax, one starts sweating about taxes, rebates, deductions and most of all its complex terminology. To overcome these problems of the common man regarding tax laws, preparations are underway to amend the provisions of the Income Tax Act 1961.
On hearing the name of income tax, one starts sweating about taxes, rebates, deductions and most of all its complex terminology. To overcome these problems of the common man regarding tax laws, preparations are underway to amend the provisions of the Income Tax Act 1961. Finance Minister Nirmala Sitharaman had directed to bring the Direct Tax Code in simple and easy language for the common people so that legal disputes can be reduced with simple laws and consistent tax rates. Although discussions have been going on about it since 2009, but the new Direct Tax Code is likely to be introduced at the time of the budget in 2025.
Here are some of the major changes that will happen:
1. Identification of taxpayers will be simplified: Taxpayers will be classified as resident or non-resident. Confusing terms related to this are being removed, which will eliminate the categories of ROR (resident and ordinarily resident), RNOR (resident but not ordinarily resident), NR (non-resident).
2. Confusion about the year will end: The words assessment year and previous year have been removed from the code. Only the word financial year will apply for filing returns.
3. Capital gains will be considered 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% (up from 15%), while long-term gains will be taxed at 12.5% (down from 20%).
4. Now call it employment income, not salaried income: Salary income will now be called employment income and income from other sources has been renamed as income from other sources.
5. Number of people helping in filing income tax will increase: CAs, CSs and CMAs may now be allowed to conduct tax audits, which was earlier limited to chartered accountants, making tax audits more accessible.
6. Uniform tax rate for companies: Both domestic and foreign companies will now pay the same tax rate, making compliance easier and promoting foreign investment.
7. 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 on almost all types of income. This will ensure that taxes are paid regularly and will help prevent tax evasion. The TDS rate for many 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 simplifying compliance for e-commerce businesses.
8. Most deductions and exemptions will be removed: 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, in the new salaried tax regime, the standard deduction for employees has increased by 50% to ₹75,000.
Goals of Direct Tax Code-2025
- Simplify tax rules so that they are easy to understand
- Increase the number of taxpayers from 1% of the population to 7.5%
- Make it easier for people to comply with tax regulations
- Reduce legal disputes with clear tax laws
Related Articles:-
Pan Card Holders Alert: Do this work by 31 December 2024 otherwise pan card will be deactivated
Bank of Baroda reduced interest rate on fixed deposit FD, check latest interest rate
