GG News Bureau
New Delhi, 1st Feb. Finance Minister Nirmala Sitharaman today announced the introduction of a new income tax bill, a direct tax code aimed at simplifying compliance for individual taxpayers. The new tax code will be introduced next week and is expected to make income tax laws easier to understand while reducing tax litigation.
Sitharaman revealed that under the new regime, individuals earning up to Rs 12 lakh (Rs 12.75 lakh including standard deductions) will be exempt from paying income tax, providing substantial relief for millions of India’s poor.
The new direct tax code aims to overhaul the Income Tax Act of 1961, which has been increasingly complicated due to numerous amendments over the years. The Finance Minister emphasized that the goal is to simplify the tax laws, reducing the 23 chapters and 298 sections of the existing Act by 60%.
The overhaul process began with the Central Board of Direct Taxes (CBDT) setting up an internal committee to evaluate various aspects of the current law, including establishing 22 specialized sub-committees. Public consultations were held, with over 7,000 recommendations received by January.
The new Direct Tax Code (DTC) is expected to bring significant changes, including the scrapping of the concept of financial year (FY) and accounting year (AY) to avoid confusion. The DTC may also introduce a 5% tax rate on income from LIC policies, which was previously exempt under the 1961 law.
Additionally, the DTC could allow company secretaries and cost management accountants to conduct tax audits, instead of only Chartered Accountants. For high earners, a standard 35% tax rate may replace the existing surcharge, and taxes on dividend income may be standardized at 15%.
The DTC may also streamline capital gains taxation across different asset classes and reduce deductions and exemptions, aligning with the simpler new tax regime.
This reform is expected to make the income tax process more transparent, efficient, and accessible for taxpayers across India.
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