DTC - Direct Tax Code 2025 Portal

The current IT statute defines the financial year as April 1 to March 31 of the following year, inherited from the 1867 British system. Most countries use the January 1–December 31 financial year. Additionally, agricultural revenue does not contribute significantly to GDP or income tax.

The primary cause of the majority of errors that occur today in the process of submitting, paying taxes, and including income for tax purposes is the confusion between the Financial Year (FY) and Assessment Year (AY).

It is anticipated that the transition from the Financial Year (FY) to the Calendar Year (CY) will facilitate tax compliance, similar to that of developed nations and other trade partners.

At present, Income Tax Act is having 2 years and often people confuse with Assessment year and financial year. Direct tax code is expected to remove this confusion and continue only with financial year going forward

It is anticipated that the term "FY" would be used as the standard for the tax year in the new Direct Tax Code, forms, protocols, and software.

Presently, the deadline for submitting income tax by individuals is July 31st.

The Direct Tax Code is anticipated to establish a new deadline of August 31, 2024, as the TDS and AIS are updated in mid-June, and there is insufficient time for taxpayers to reconcile the data.

Latest Income Tax Calendar at Tax Compliance Calendar for FY 2024-25 (IT, GST, TDS)

Reduced rates of tax deducted at source (TDS) and tax collected at source (TCS) that are applicable to all existing and new income categories.

Learn more on latest TDS Rates effective Oct 1st 2024 at Latest TDS Rates by Section | Simplified Version

Throughout the years, numerous exemptions and deductions have been rendered inactive. As a result of the increasingly popular new tax regime, taxpayers are unable to utilize nearly all of these deductions.

Therefore, it is anticipated that numerous deductions and exemptions will be eliminated or withdrawn.

Learn more on deductions that are no longer available for New Tax Regime Difference between Old Tax Regime and New Tax Regime

The capital gains (CG) tax is a broader area in which a significant number of amendments have been approved since the IT Act of 1961. Simplifying the entirety of the capital gains tax sections to facilitate the assessment of income tax.

Although some CG Tax rates were streamlined in early 2024, there is a significant amount of anticipation for the DTC 2025.

Latest changes and a comprehensive guide at Capital Gains Income Tax Guide

As of the most recent information from the Central Board of Direct Taxes (CBDT), the New Tax Regime (NTR) is the filing method for up to 70% of ITRs in FY 2023-24 (AY 2024-25).

We are expecting a plan to sunset the Old Tax Regime (OTR) from FY 2026-27.

It is anticipated that the disclosure requirements for foreign assets will be simplified to reduce the volume of information that must be disclosed during IT returns and other compliances.

As of today, the necessary information that the Schedule FA of the ITR cannot conceivably collect from any of the G&L statements of foreign entities is unavailable.

Learn more on this at Foreign Asset Reporting — Explained

The tax residence status could be simplified for tax purposes by combining legal status and presence days in India, rather than relying on quantum of income and intent.

Due to the distinctions between the Income Tax and FEMA Acts, it is expected that the Substantial Presence Test will be re-defined.

More on Tax Residence Status and calculator at Determine Tax Residency Status of an Individual or Company

Expected to be refined to reduce the ambiguity surrounding the alignment of the financial year, eliminate source-based taxation entirely, and provide a re-affirmed approach to residence-based taxation

Learn more at Taxation on NRI and Foreign Income

While existing income tax act and the introduction of Section 68 and 69 are fair but such was not spelled well w.r.t IT filing and compliance and digital money.

The new DTC 2025 is expected to introduce unaccounted digital money as well, such as UPI, income from multiple banks for one entity, linking with/without GST.

More on taxation on Black money or undisclosed money at Tax on Black Money

The Indian government must take measures to safeguard its interests in tax collection from entities established outside of India, as numerous services are now being provided online on a daily basis.

Although the Equalisation Levy (EL) was implemented in 2020, the Direct Tax Code 2025 will revisit EL in order to safeguard Indian interests in light of the macroeconomic environment and the emergence of a new tide of digital products.

Learn more on Equalisation Levy - Explained

At present, only chartered accountants are conducting tax audits. The Direct Tax Code is anticipated to broaden the definition of an accountant by also allowing other professionals such as CMAs, Cost Accountants (ICWA), and CSs to conduct tax audits.

This would enhance the availability of professionals for companies, LLPs, and other entities that require tax audits.