New Direct Tax Code to Be Implemented from April, No New Taxes Included - Says Finance Secretary

resr 5paisa Research Team

Last Updated: 4th February 2025 - 06:08 pm

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The new direct tax code, which is set to be introduced during the Budget session of Parliament and announced as part of the Union Budget 2025-26, is being prepared as a completely new legislation. Finance Secretary, Tuhin Kanta Pandey clarified in a Moneycontrol interview. The bill aims to bring significant structural changes to the taxation framework while ensuring a rationalized and simplified approach.

A Completely New Tax Code

The direct tax code bill is being drafted as an entirely new piece of legislation, replacing the existing tax laws. It is undergoing a complete rewrite to enhance clarity, improve connectivity, and eliminate redundant provisions. Structural reforms are being prioritized to make tax regulations easier to understand and apply.

Tuhin Kanta Pandey said, “It will not change (tax rates) in that because that will be the prerogative of the tax policy. But structurally, it undergoes a massive change. The way it reads, the way it connects, the way it is understood. And the way the redundancy is removed. So, rationalization and simplification exercise will follow in that.”

No Changes to Tax Rates

The existing tax rates will remain unchanged, as the authority to modify them rests with the government’s tax policy decisions. The new bill, however, is expected to introduce a streamlined and more efficient tax structure that will enhance compliance while reducing complexities in the system. The focus will be on making the legal framework more accessible and practical for taxpayers.

Several reforms are being incorporated into the new tax code, continuing the modernization efforts introduced in recent years. Decriminalization of certain offences has already been carried out, and these reforms will be seamlessly carried forward under the new framework. The new direct tax code will come into effect from April 1, allowing a smooth transition to the updated tax regulations.

No Increase in Capital Gains or Securities Transaction Tax

Concerns regarding possible increases in capital gains tax or securities transaction tax under the new bill have been ruled out. The focus of this legislation is on defining the tax structure rather than modifying tax rates. The bill will consolidate multiple provisions into a more concise legal framework, reducing the overall complexity of tax laws while maintaining taxpayer confidence.

Encouraging Economic Growth

The government aims to enhance economic flexibility through the rationalization of tax structures. The existing system, which allows taxpayers to decide how they utilize their income, whether through spending, saving, or investing will remain unchanged. These choices contribute positively to economic growth, aligning with the country’s current financial needs.

By focusing on simplification and efficiency, the new direct tax code seeks to provide a more transparent and streamlined taxation system without imposing additional financial burdens on taxpayers.

Conclusion

With its focus on simplification, structural efficiency, and taxpayer-friendly reforms, the new direct tax code aims to modernize India’s taxation framework without introducing any additional financial burdens. By ensuring continuity in existing reforms, eliminating redundancies, and maintaining stable tax rates, the bill is expected to enhance compliance and ease of understanding for taxpayers. 


Source: MoneyControl

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