Union Budget 2025: FM Nirmala Sitharaman to announce 'New Income Tax bill' based on DTC next week

Finance Minister Nirmala Sitharaman, in her Union Budget 2025-26 presentation on Saturday, announced plans to introduce a new Income Tax Bill. This bill will be based on the highly anticipated Direct Tax Code (DTC), designed to overhaul the existing Income Tax Act of 1961. The goal is to create a simpler and more efficient tax system that benefits both individuals and businesses.

The proposed changes in the new tax structure are expected to simplify the current framework by up to 60%. The DTC's primary goal is to reduce the complexity of the Income Tax Act, making it easier for taxpayers to understand and comply with tax regulations. Additionally, the DTC will consolidate various provisions of the tax system into a more organized and accessible structure, minimizing legal disputes and encouraging better tax compliance across the country.

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While the full details of the bill will be revealed in the coming weeks, Sitharaman’s previous budget speeches have indicated a clear focus on benefiting middle-class taxpayers. As a result, there are expectations of revisions to income tax slabs, along with increased standard deductions. Under the current tax regime, taxpayers with an income up to ₹3 lakh are not required to pay taxes, with incremental tax rates applied for higher income levels.

Taxpayers are hopeful that the upcoming reforms will include a hike in the standard deduction limit, which will offer further relief. Another much-awaited change could be the potential merger of the old and new tax regimes, reducing the confusion that taxpayers face when deciding between the two options.