Income Tax खत्म हो गया । What is Direct Tax Code | Direct Tax Code 2025 | Direct Tax Code 2025 |

Summary

The video discusses the upcoming Direct Tax Code (DTC) 2025, which will replace the Income Tax Act of 1961. Key changes include simplified tax structures, reduced taxes for salaried employees, and higher taxes for ultra-rich individuals. The new code will streamline the residential status categories, eliminate the surcharge on income, and expand TDS and TCS application. Additionally, it will bring more individuals into the tax base while maintaining exemptions for political parties. The code aims to simplify the tax system, making it more inclusive and progressive, with significant changes expected from April 1, 2025.

Takeaways

• 😀 The Income Tax Act of 1961 will be replaced by the Direct Tax Code (DTC) 2025, which will be introduced in the Union Budget of 2025 and apply to the financial year starting April 1, 2025.
• 😀 The new DTC aims to simplify the current complex tax structure, which has many outdated provisions from the British era.
• 😀 Salaried employees will see a significant reduction in their tax burden, addressing long-standing complaints about their higher taxes compared to business owners.
• 😀 The DTC will introduce differentiated tax rates for ultra-rich individuals, ensuring that the wealthy pay higher taxes than the average taxpayer.
• 😀 Capital gains tax may be integrated with regular income tax, which could lead to higher tax rates for those with substantial capital gains.
• 😀 The residential status system will be simplified, with only two categories: resident and non-resident, removing the need for terms like 'resident but not ordinary resident'.
• 😀 The previous year and assessment year concepts will be eliminated, and only the financial year will matter for tax calculations.
• 😀 The power for tax audits, currently held by Chartered Accountants, may extend to Cost and Management Accountants (CMA) as well.
• 😀 The new Direct Tax Code will reduce the number of tax sections and clauses, from 298 in the Income Tax Act to just 319 sections, simplifying the overall tax framework.
• 😀 The government intends to increase the number of tax payers by expanding the scope of tax collection, potentially bringing more individuals, even with lower incomes, under the tax net.
• 😀 Political party income will remain exempt from taxation under the new Direct Tax Code, continuing the existing practice.

Q & A

What is the Direct Tax Code 2025, and when will it be introduced?

The Direct Tax Code 2025 is a new tax law that will replace the existing Income Tax Act. It will be introduced in the Union Budget of 2025, and the provisions will apply to income earned from April 1, 2025, onwards.

Why is the government introducing the Direct Tax Code 2025?

The current Income Tax Act, written in 1961, has become overly complicated due to frequent updates and provisions. The new Direct Tax Code aims to simplify the system, making it easier for taxpayers to understand and comply.

How will the Direct Tax Code 2025 benefit salaried employees?

The new code aims to lower the tax burden on salaried employees, addressing their complaints about higher taxes compared to businessmen. There will be specific benefits for salaried individuals to reduce their overall tax liability.

What changes are being made to tax rates for the ultra-rich?

The Direct Tax Code will introduce a higher tax rate for ultra-rich individuals, aiming to make the tax system more progressive by taxing the wealthy at a higher rate than regular taxpayers.

Will the surcharge on income tax be removed under the new code?

There is a possibility that the surcharge on income tax will be removed under the new Direct Tax Code, which could simplify the overall tax structure.

How will the scope of TDS (Tax Deducted at Source) change?

The scope of TDS will expand under the new code, meaning more types of income will have TDS deducted. However, the tax rate for TDS may be slightly lower in some cases.

What changes are expected in the taxation of capital gains?

The Direct Tax Code might integrate capital gains tax with normal income tax, leading to higher overall tax rates for those earning capital gains.

How will the concept of residential status change under the new tax code?

Under the Direct Tax Code, the residential status will be simplified to just two categories: resident and non-resident. The previous classifications like 'Resident and Ordinary Resident' (ROR) and 'Non-Resident' (NR) will be removed.

What changes will be made to the tax filing system under the new code?

The concept of previous year and assessment year will be eliminated, with the focus shifting entirely to the financial year for tax filing purposes.

Who will have the authority to conduct tax audits under the new code?

Currently, only chartered accountants (CAs) have the authority to conduct tax audits. However, under the new Direct Tax Code, cost and management accountants (CMAs and CS) may also be granted this power.

How will the number of tax sections be impacted under the new code?

The number of sections in the Income Tax Act will be reduced from 298 to 319 under the new Direct Tax Code. This simplification aims to make the tax law more streamlined and easier to understand.

Will the new tax code expand the number of people paying taxes?

Yes, the government plans to expand the tax base under the Direct Tax Code, with the goal of having a higher percentage of people paying taxes. This could include lower-income individuals as well.

Will political party income be taxed under the new tax code?

No, political party income will remain exempt from taxes under the Direct Tax Code, just as it is under the current tax system.