Author(s): Rupak Das, Munish Swaroop, Anmol Tibrewal, Ritwika Mazumdar and Bhawna Tyagi
The evolution of the taxation system in India replicates multiple political, economic, and governance backgrounds that have influenced its development over the centuries. The historical route of taxation, examined in this study, can be traced from ancient texts such as the Manu Smriti and Arthashastra to the contemporary Indian tax framework, significantly shaped by British colonial governance and subsequent reforms enacted after India gained independence. In this paper, attention is directed toward the newly proposed Direct Tax Code 2025, which is compared against the existing Income Tax Act, 1961. This evaluative comparison seeks to outline key discrepancies between the two frameworks, assess the efforts aimed at simplification, and analyse the implications of these changes on individual taxpayers, businesses, and the broader economic landscape. The research assesses significant modifications proposed under the DTC, and the anticipated benefits of these changes in terms of transparency, improving compliance, expanding the tax base and fostering a more equitable taxation model. In addition, the study also addresses the consequences stemming from the removal of certain deductions and exemptions, the streamlining of tax rates, and the subsequent influence on investment behaviours.