Income Tax Law 2025 VS Direct Tax Code Proposals: How are they different?

The Income Tax Law project, 2025, established to replace the Income Tax Law of six decades, 1961, provides significant refinements to the fiscal framework of India.

However, unlike the proposals of the Direct Tax Code (DTC) of 2009 and 2010, which sought a complete tax review, the new bill largely retains the existing structure by introducing key updates.

The idea of ​​a DTC was first introduced in 2009 to replace the Income Tax Law of 1961, with a more simplified and uniform fiscal framework.

The DTC bill, 2010, proposed important changes, including uniform tax lasas, a lower corporate tax rate and a simplified approach to capital gains taxes. However, concerns about loss of income, investor resistance to capital gains reforms and opposition to stricter measures against avoidance led repeated delays.

With the change in the government in 2014, the approach changed to incremental reforms instead of a complete review, and the DTC was never implemented. Instead, successive budgets introduced tax changes within the framework of the existing law, which led to the Income Tax Invoice, 2025.

The DTC was aimed at simplifying fiscal laws proposing uniform tax slabs, a 25% corporate tax rate and a broad -based fiscal structure. The Income Tax Law project, 2025, while modernizing fiscal legislation, retains a progressive tax system with revised slabs and deductions. Corporate taxes remain largely unchanged, although incentives are introduced for specific industries.

A crucial change is in the administration, while the electronic presentation proposed by DTC proposed the DTC, the new bill prioritizes the evaluations of the faceless and digital compliance for corruption.

In the same way, the taxes of foreign entities see refinements instead of the introduction of rules of the Foreign Controlled Corporation (CFC), which were part of the DTC.

Capital gains taxes remain a key difference. The DTC sought uniformity in asset classes, while the new bill continues to distinguish between different types of investment, maintaining indexation benefits.

The General Anti-Evaluation Rule (GAAR) is preserved but with refinements for effective implementation. The residence rules also see updates, particularly for non -residents (NRI) Indians.

Taxes on the digital economy is another important update: while the DTC lacked specific provisions, the new bill introduces taxes for cryptocurrencies and digital transactions.

In fact, the new bill defines “Virtual digital asset (VDA) as any digital representation of value, excluding traditional currencies, which can be transferred, stored or negotiated electronically. This includes cryptocurrencies, non -fungible tokens (NFT) and other digital assets specified by the government. VDA function as a value reserve, a account unit or an investment tool, which depends on cryptographic or similar technologies for safety and validation. “

The Government will soon introduce the Income Tax Law project, 2025, replacing the Income Tax Law, 1961. The new legislation, scheduled for April 1, 2026, aims to simplify tax structures, improve the compliance and fiscal evasion diving.

Gouri Puri, partner, Shardul Amarchand Mangaldas & Co, said: “At first glance, the code does not present any policy change. As promised, the new fiscal law seems to focus mainly on simplification and consolidation, such as introducing the concept of the year Prosecutor.