Sat Feb 01 12:38:16 IST 2025: ## India to Introduce Simplified Income Tax Code, Offering Major Tax Relief

**New Delhi** – Finance Minister Nirmala Sitharaman announced the introduction of a new Direct Tax Code (DTC) next week, aiming to simplify India’s complex income tax system. The DTC, part of the Union Budget 2025, promises easier compliance and reduced tax litigation.

A major highlight is the significant tax relief for millions of Indians: no income tax will be levied on incomes up to ₹12 lakh (approximately $145,000 USD including standard deductions) under the new regime. This measure significantly benefits the middle class.

The current Income Tax Act of 1961, with its 23 chapters and 298 sections, has been criticized for its complexity. The DTC aims to drastically reduce this complexity, potentially cutting the Act’s length by 60 percent. The government extensively reviewed the existing law, including public consultations that yielded over 7,000 submissions.

Key differences between the DTC and the existing Act include:

* **Simplification:** The DTC aims to streamline tax laws, potentially eliminating the distinction between financial year and assessment year.
* **Tax on LIC policies:** A 5% tax on income from Life Insurance Corporation (LIC) policies may be introduced.
* **Tax audit professionals:** The DTC might expand the range of professionals permitted to conduct tax audits beyond Chartered Accountants.
* **Standardized tax rates:** The DTC may standardize tax rates for dividends (15%) and high earners (35%), eliminating variable surcharges.
* **Capital gains tax:** The DTC might harmonize capital gains taxes across different asset classes.
* **Single tax regime:** The DTC may eliminate the choice between different tax regimes currently available to taxpayers.
* **Reduced deductions and exemptions:** Similar to the new tax regime under the current Act, deductions and exemptions may be reduced.

The DTC is expected to significantly reshape India’s tax landscape, offering both simplification and substantial tax relief for a large segment of the population.

Read More