The direct tax code (DTC)  will be aimed at simplifying and modernising the existing direct tax law i.e. the Income-tax Act, 1961. The DTC will also be in-line with the global standards making the taxation simpler for both residents and non-resident taxpayers. In this article, we will explain in detail the expectations and differences between the DTC and the Income-tax Act.

Budget 2026 Update

• The Income Tax Act 2025 will come into effect from 1st April 2026 and will be applicable for FY 2026-27 and onwards. 
• The Income Tax Act 1961 will still be applicable for FY 2025-26 (AY 2026-27)

What is the Direct Tax Code 2025?

The Direct Tax Code aims to simplify, streamline, and standardise the existing complex income tax laws for everyone. The government intends to increase the number of taxpayers contributing to the income tax and hence wants to simplify the tax laws for the enhancing their participation. The primary goal is to make the compliance easier for all the taxpayers.

Why Direct Tax Code is Replacing Income Tax Act?

The purpose of introducing the Direct Tax Code (DTC) is to simplify and streamline tax laws, as the income tax act has become complex due to numerous amendments over time. The DTC will aim at enhancing transparency and make tax compliance easier for both individuals and businesses. Additionally, it will also focus on simplifying the process of calculating and filing income tax returns, ensuring it is straightforward and user-friendly.

Key Difference Between Income Tax Act and Direct Tax Code

The key differences between the Income Tax Act v/s Direct Tax Code are as follows:

Conclusion

Taxpayers are eagerly anticipating the introduction of the Direct Tax Code (DTC), hoping for positive reforms that will ease their compliance burden. Its implementation is expected to bring about significant changes to the taxation landscape, potentially boosting the economy.