The Union Budget 2025 has brought significant tax reforms, with major announcements on TDS rationalization, tax deductions for senior citizens, and the introduction of a new direct tax code.
TDS Rates Rationalized & Higher Tax Deductions for Senior Citizens
Finance Minister Nirmala Sitharaman announced that TDS (Tax Deduction at Source) rates will be rationalized, making tax compliance easier for individuals and businesses.
A major relief for senior citizens is the increase in the tax deduction limit from ₹50,000 to ₹1 lakh, allowing them to save more on their taxable income.
Additionally, the deadline for filing updated returns has been doubled to four years, giving taxpayers more flexibility to correct or update their filings.
New Direct Tax Code: A Game Changer?
The biggest takeaway from the budget was the confirmation that a new direct tax code will be introduced next week. This long-awaited reform aims to simplify income tax laws and improve compliance for individual taxpayers.
Sources had hinted at this move, and now it’s official – a fresh Income Tax Bill is on its way.
How Will the New Tax Code Be Different?
The current Income Tax Act of 1961 is complex, spanning 23 chapters and 298 sections. The new tax code aims to:
- Reduce complexity by cutting down the length of the I-T Act by 60%
- Eliminate confusion by scrapping the financial year (FY) and accounting year (AY) system
- Introduce new taxes, including a possible 5% tax on LIC insurance policy income, which was previously exempt
- Standardize dividend income tax at 15%, rather than at slab rates
- Abolish the choice between old and new tax regimes, making taxation more streamlined
These changes are expected to make taxation simpler, more transparent, and easier to comply with.
What’s Next?
With the new tax bill set to be introduced next week, taxpayers should stay informed about how these changes will impact their financial planning, investments, and savings.
Stay tuned for updates as the new direct tax code takes shape!
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