look news india
Income Tax: As soon as we hear the name of income tax, we start sweating thinking about taxes, exemptions, deductions and above all its complex terminology. To remove 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 understandable language for the common people so that legal disputes can be reduced through simple laws and uniform tax rates. Although this has been under discussion since 2009, the new Direct Tax Code is likely to be introduced at the time of the budget in 2025. Some of the major changes made in it are as follows-
1. Identification of taxpayers will be simplified: Taxpayers will be classified as resident or non-resident. Misleading words are being removed, leading to the elimination of categories like ROR (resident and ordinarily resident), RNOR (resident but not ordinarily resident), NR (non-resident).
2. Confusion regarding the year will end: The words assessment year and previous year have been removed from the Code. Only the financial year term will be applicable for filing returns.
3. Capital gains to be treated as regular income: Capital gains will be taxed as regular income. This may mean higher taxes 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%).
4. Now call it employment income, not salary income: Salary income will now be called employment income and income from other sources has been renamed as income from other sources.
5. The number of people helping in filing income tax will increase: CAs, CS and CMAs can now be allowed to conduct tax audit, which was earlier limited to chartered accountants, making tax audit more accessible.
6. Uniform tax rate for companies: Both domestic and foreign companies will now pay the same tax rate, which will ease compliance and encourage foreign investment.
7. TDS and TCS on all types of income: Under the new tax system, tax deducted at source (TDS) and tax collected 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. 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%, which will provide relief to taxpayers and simplify compliance for e-commerce businesses.
8. Most deductions and exemptions will be removed: Most of the 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 employees has increased by 50% to ₹75,000 in the new salaried tax regime.
Objectives of Direct Tax Code-2025
- Simplify tax rules so they are easy to understand
- Increasing the number of taxpayers from 1% to 7.5% of the population.
- Making it easier for people to comply with tax regulations
- Reducing legal disputes through clear tax laws