As Budget 2025 nears, reports suggest that Finance Minister Nirmala Sitharaman may introduce a new income tax bill in the upcoming budget session of Parliament. The proposed tax bill is expected to be based on the Direct Tax Code (DTC) and aims to simplify tax compliance while making the Income Tax Act more accessible and understandable for taxpayers.
New Income Tax Bill: What to Expect?
The discussion around a new income tax bill gained momentum after the previous Budget announcement, where the government highlighted the need to review the Income Tax Act. This review was aimed at eliminating redundant provisions, making tax laws more structured and ensuring ease of compliance for individuals and businesses.
According to tax experts, a well-structured tax simplification could modernise India's income tax framework while aligning it with global best practices. Budget 2025 may introduce a phased roadmap for implementation instead of an immediate overhaul, ensuring a smooth transition.
Potential Reforms in Budget 2025
Simplifying Residential Status Laws
The current income tax laws classify taxpayers into three categories—Resident Individual, Resident but Not Ordinarily Resident, and Non-Resident Individual. A simplified system would ease tax compliance and reduce confusion.
Clarifying Financial Year vs. Assessment Year
Many taxpayers struggle with the difference between the financial year (FY) and assessment year (AY). The new income tax bill may address this issue to enhance clarity.
Reduction in Tax Rates & Exemptions
The Direct Tax Code (DTC), 2009 had proposed eliminating multiple exemptions and deductions. The new tax regime, introduced earlier, was a step in this direction. Budget 2025 could further streamline exemptions while balancing taxpayer benefits.
With expectations high, Nirmala Sitharaman’s Budget 2025 could pave the way for a modern and efficient tax system, benefitting both taxpayers and the economy.