Budget 2025: Can new law replace Income Tax Act, 1961?

The Union Budget 2025 will be announced by Finance Minister Nirmala Sitharaman on February 1, 2025. The upcoming budget is eagerly anticipated by the taxpayers, while the middle class is expecting some serious tax reliefs.

Among all these anticipations, reports are also stating that the centre may introduce the Direct Tax Code (DTC) 2025, which shall be a simplified version of the income tax laws soon. This shall replace the Income Tax Act, 1961.

The Direct Tax Code will replace the existing income tax laws. The DTC will make the income tax laws simpler, and reduce legal complications and litigations for individuals, the industry, and the government.

Experts also warned that the government should not rush these reforms and should follow a proper process, including releasing a draft and making discussions with the public. The changes may be implemented in stages via the upcoming budget and continue to take place in the following months. 

What changes can happen after DTC implementation?

The DTC will reduce the number of sections and chapters in the current Income Tax Act, remove outdated provisions, and clarify the wording, with the goal of making the legislation easier to understand and apply for both taxpayers and experts.

To make return filing more convenient and easy, the number of additional forms required under current income-tax law shall be reduced. To improve clarity, identical taxpayer scenarios might be given in tabular format, making them easier to understand for individuals.

Under DTC, key changes may also include simpler income-tax calculations, one tax year, and clearer representation.

For feedback and suggestions, write to us at editorial@iifl.com