Shaurya Agarwal & Co.

Major Expected Changes in Direct Tax Code 2025: 1. Removal of Assessment and Previous Year Concepts: The code removes the terms “Assessment Year” and “Previous Year”. Only the term- “Financial Year” will be applicable for tax filing. 2. Capital Gains Tax Changes: Capital gains will be taxed as regular income. Short-term gains on financial assets will be taxed at 20% (up from 15%), while long-term gains will be taxed at 12.5% (down from 20%). 3. Simplified Residential Status: Taxpayers will be classified as either residents or non-residents, eliminating the RNOR (Resident but Not Ordinarily Resident) category. 4. New Income Category Names: “Income from Salary” is now called “Employment Income,” and “Income from Other Sources” is renamed “Income from Residuary Sources.” 5. Expanded Tax Audit Roles: Company Secretaries (CS) and Cost and Management Accountants (CMA) may now be allowed to conduct tax audits, which was previously limited to Chartered Accountants (CAs), making tax audits more accessible. 6. Unified Company Tax Rates: Both domestic and foreign companies will now pay the same tax rate, making compliance easier and encouraging foreign investment. 7. TDS and TCS on Most Income: Under the new tax system, Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) will apply to nearly all types of income. This ensures taxes are paid more regularly. The TDS rate for many payments will drop from 5% to 2%. For e-commerce operators, the TDS rate will significantly decrease from 1% to 0.1%, offering relief to taxpayers and simplifying compliance for e-commerce businesses. 8. Fewer Deductions and Exemptions: Most deductions and exemptions will be removed, streamlining tax filing. However, the standard deduction for salaried employees in the new tax regime has increased to ₹75,000, a 50% rise.

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