Budget 2025 could start implementing Direct tax code by cutting tax rates, removing exemptions, lay out road map

There is a buzz going around that Finance Minister Nirmala Sitharaman is likely to introduce a new income tax bill in the budget session of the Parliament. The new income tax bill is expected to be modelled on the Direct Tax Code. The new tax bill is proposed to make tax compliance easier for taxpayers and make the Income Tax Act easier to read and understand.

The buzz around the new income tax bill started after the announcement in the last Budget that the Income Tax Act would be reviewed. The review was announced to remove duplication of income tax laws and also to ensure that tax laws are easy to read for a lay person.

Rakesh Nangia, Managing Partner, Nangia & Co LLP – a tax consulting firm, says, “A well-structured simplification could modernise and simplify India’s income tax framework, addressing complexities in the current law while aligning with global best practices. The government may use Budget 2025 to unveil a roadmap for phased implementation, rather than announcing an immediate and comprehensive overhaul. Provisions targeting reduction in tax rates, rationalising exemptions, and simplifying compliances could be introduced as initial steps in the upcoming budget. While the simplification measure offers an opportunity for significant reform, its success depends on balancing public expectations, stakeholder preparedness, and political considerations. A gradual approach may be a practical strategy, ensuring a seamless transition and sustained confidence in the tax system.”

Publication – The Economic Times 

By Rakesh Nangia