Budget 2025: FM Sitharaman Likely to Announce New Direct Tax Code

Budget 2025: FM Sitharaman Likely to Announce New Direct Tax Code
Finance Minister Nirmala Sitharaman will present the Union Budget 2025-26 on February 1, 2025. Experts expect her to introduce the Direct Tax Code (DTC 2025), which aims to replace the Income Tax Act of 1961. The new tax code is expected to simplify tax laws, reduce legal disputes, and make the process easier for taxpayers.
The government may gradually phase out the old tax regime. Currently, taxpayers can choose between the old and new tax systems. However, government data shows that around 72% of taxpayers opted for the new tax regime in FY 2023-24. With this trend, experts believe the government may focus entirely on the new tax system in the future.
DTC 2025 is likely to benefit middle-class taxpayers, particularly those earning between ₹5 lakh and ₹15 lakh annually. Key changes under the new code may include:
Simplified and integrated tax structure.
Reduced number of tax slabs.
Easier tax filing processes.
The DTC may simplify residential status classifications. Categories like “Resident but Not Ordinarily Resident (R-OR)” and “Resident but Non-Resident (R-NOR)” may be removed to make the process clearer.
The government is also considering a phased reduction of tax deductions and exemptions. To balance this, tax rates may be lowered, and the process made more straightforward.
This will be the first full budget of the Modi government’s third term, raising high expectations from taxpayers, especially the middle class.