Direct Tax Code is a proposed legislation set to modernize, simplify and align India’s tax law into a single code by taking in a new era of efficient and transparent taxation.
On 21st August 2024, Finance Minister Nirmala Sitharaman during the 165th year of Income Tax in India introduced the forthcoming Direct Tax Code (DTC).
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Its goal is to replace the existing Income Tax Act, 1961, with a more straightforward and transparent system.
Evolution of DTC
The concept of DTC has been in development for over a decade:
Year 2009
The First draft of the DTC was proposed to replace the Income Tax Act.
2010
A revised discussion paper was released, followed by the introduction of the Direct Tax Code Bill, 2010 in the Lok Sabha.
2013
The DTC was revised after considering feedback from stakeholders
2017
Six member task force was established to draft new Direct Tax Law.
2024
The announcement of DTC’s forthcoming introduction by Finance Minister Nirmala Sitharaman.
2025
The DTC is expected to be introduced with Budget 2025.
Purpose
- Easy Compliance by reducing the complexity of tax laws.
- Making tax system more user friendly.
- Providing clear and predictable tax regulation.
- Minimizing disputes by simplifying the tax code.
Difference between Income Tax Act and Direct Tax Code
Nature | Income Tax Act | Direct Tax Code |
Financial Year and Assessment Year | Both are applicable | Only Financial Year |
Residential Status | Resident, Non Resident, Non Ordinarily Resident | Resident, Non Resident |
Simplification | Proviso and explanation in very sections | No proviso and explanation |
Tax Audit | Conducted by only Chartered Accountants | Can be conducted CA, CS and Cost Accountants. |
Tax on Distributed Income | Income from like LIC, mutual Fund etc are exempted | Taxable @ 5% |
Tax Rate for Income above 10 Cr | 30% + Surcharge @ 15% | Taxable @ 35% |
Taxation on Dividends | Subject to Dividend Distribution Tax @ 15% | Taxed @ 15% without DDT |
Angel Tax
Domicile Certificate
Unified Pension Scheme (UPS)