 "Taxation in India is currently governed by the Income Tax Act, 1961. Representational image/Pixabay")
In a few hours from now, Union Budget 2025 will be known to all. However, in the run-up to the big moment, there is lot of speculation about what to expect.
From investors in the market to corporates and the common man, everyone is hoping for some relief from the Centre.
Finance Minister Nirmala Sitharaman is reportedly going to announce a new bill introducing a new income tax system to simplify tax laws during the Budget Session, which starts tomorrow. But what do we know so far?
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But is a simpler income tax system in the offing? What do we know?
Let’s take a closer look:
What do we know?
First, let’s take a brief look at our current tax system.
Taxation in India is currently governed by the Income Tax Act, 1961.
As per NDTV, the 1961 Act governs direct taxes such as personal tax, corporate tax securities, gifts, and wealth.
It has nearly two dozen chapters and 298 sections.
Complicating matters is the fact the government in 2020 also introduced a new tax regime – which is used by most taxpayers.
However, the old tax regime , which offers a slew of deductions, continues to function.
People have been calling for a simplification of the tax system for years.
Sitharaman herself announced a ‘comprehensive review’ of the Income Tax Act last July.
“This will help reduce disputes and litigation, and it is expected to be completed within six months," Sitharaman said.
India Today reported that Sitharaman is likely to introduce a new income tax bill during the upcoming Budget Session.
The idea behind the bill is be to simplify taxation laws and bring them in line with the current economic situation.
The government wants to bring down the size of the legislation by around 60 per cent – thus making it clearer and more concise.
What about the new tax code?
However, NDTV quoted sources as saying that the Direct Tax Code (DTC) will not be part of the 2025 Union Budget on Saturday .
Instead, Sitharaman will unveil it at a separate time.
This is in contrast to reports that the DTC would be revealed with the Budget speech.
The outlet reported that the new code would likely do away with the financial year concept.
A 15 per cent flat tax on dividend is also being considered.
The Central Board of Direct Taxes (CBDT) had set up an internal committee to examine the overhaul of the law.
This included 22 specialised sub-committees examining various aspects of the old code.
PTI reported that the committee in charge of revising the law is thinking of replacing the 1961 Act rather than amending it.
India Today reported that the committee wants to breakup the Income Tax Act into two or even three parts.
This, the committee said, will gave taxpayers greater clarity and make the entire process much more efficient.
According to the report, the bill will be introduced directly in Parliament.
The draft law would be unveiled during the latter half of the Budge t Session.
As per NDTV, the Centre in October had invited stakeholders including the public and experts to give their feedback.
Around 7,000 suggestions were sent in by January.
With inputs from agencies