Direct Tax Code (DTC) Bill

The Direct Taxes Code (DTC) was a proposed legislation in India aimed at replacing the existing Income Tax Act of 1961. The objective of the DTC is to simplify and streamline the direct taxation system, making it more efficient, transparent, and taxpayer-friendly.

Hon’ble Finance Minister Nirmala Sitharaman presented the Union Budget 2025 in the Parliament on 01.02.2025. In the budget speech, she talked about the tax reforms as:

“Over the past 10 years, our Government has implemented several reforms for convenience of tax payers, such as (1) faceless assessment, (2) tax payers charter, (3) faster returns, (4) almost 99 per cent returns being on self-assessment, and (5) Vivad se Vishwas scheme. Continuing these efforts, I reaffirm the commitment of the tax department to “trust first, scrutinize later”. I also propose to introduce the new income-tax bill next week. I will detail the indirect tax reforms and changes in direct taxes in Part B.”

Total Sections and Schedules in the DTC

The DTC contains 325 Sections and 23 Schedules.

Statement of Objects and Reasons of the Direct Tax Bill

The Income-tax Act, 1961, has been subjected to numerous amendments since its passage fifty years ago. It has been considerably revised, not less than thirty-four times, by amendment Acts besides the amendments carried out through the annual Finance Acts. These amendments were necessitated by policy changes due to the changing economic environment, increasing sophistication of commerce, increase in international transactions as a result of globalisation, development of information technology, attempts to minimise tax avoidance and in order to clarify the statute in relation to judicial decisions. As a result of all these amendments, the basic structure of the Income-tax Act has been over burdened and its language has become complex. Tax administrators, accountants and tax payers have raised concerns about the complex structure of the Income-tax Act. In particular, the numerous amendments have rendered the Act difficult to decipher by the average tax payer. The Wealth-tax Act, 1957 has also witnessed amendments.

The Government, therefore, decided to revise, consolidate and simplify the language and structure of the direct tax laws. A draft Direct Taxes Code along with a Discussion Paper was released in August, 2009 for public comments.