The Direct Tax Code (DTC) 2025 introduces a comprehensive framework for direct tax compliance in India. This FAQ series addresses the most common questions about the DTC, its provisions, and compliance requirements. Part 1 covers the basic framework and fundamental compliance obligations.
General Framework
Q1: What is the Direct Tax Code (DTC) 2025?
The Direct Tax Code (DTC) 2025, enacted as the Income-tax Act, 2025 [30 OF 2025], consolidates and amends the law relating to income-tax in India. It replaces the Income-tax Act, 1961 and introduces a modernised framework for direct tax compliance【536†L1】.
Q2: When does the DTC come into effect?
The DTC came into force on the 1st April, 2026, replacing the Income-tax Act, 1961.
Q3: What is the scope of the DTC?
The DTC extends to the whole of India and applies to all persons as defined under Section 2(77), including individuals, Hindu undivided families, companies, firms, association of persons, body of individuals, local authorities, and artificial juridical persons.
Q4: What is a "tax year" under the DTC?
Under Section 3, "tax year" means the twelve months period of the financial year commencing on the 1st April. In the case of a newly set up business or profession, the tax year begins from the date of setting up and ends with the financial year.
Charge of Tax
Q5: How is income-tax charged under the DTC?
Under Section 4, income-tax for any tax year shall be charged at the rate or rates specified in the Finance Act of the relevant year. The charge is on the total income of the tax year of every person.
Q6: What is the scope of total income?
Under Section 5, the total income of a resident includes all income from whatever source derived which:
- Is received or deemed to be received in India in that year
- Accrues or arises, or is deemed to accrue or arise, to such person in India in that year
- Accrues or arises to such person outside India in that year (with exceptions for not ordinarily resident)
For a non-resident, total income includes income received or deemed to be received in India, or income accruing or arising in India.
Heads of Income
Q7: Under what heads is income classified?
Under Section 13, all incomes are classified under the following heads:
- Salaries
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources【13†L4-L6】
Q8: What is included in "Salaries"?
Under Section 16, "salary" includes wages, any annuity or pension, any gratuity, any fees or commission, perquisites, profits in lieu of salary, advance of salary, leave encashment, and contributions to provident funds and pension schemes【16†L2-L13】.
Q9: How is income from house property computed?
Under Section 20, the annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee, is chargeable under the head "Income from house property"【20†L1-L2】. The annual value is determined under Section 21【21†L1-L2】.
Q10: What is the standard deduction for salaried employees?
Under Section 19(1) (Table: Sl. No. 2), a standard deduction of:
- Rs. 75,000 or salary, whichever is less, where income-tax is computed under Section 202(1) (new tax regime)
- Rs. 50,000 or salary, whichever is less, in any other case【19†L4-L6】
Filing of Return
Q11: Who is required to file a return of income?
Under Section 263(1), every person including a company, firm, and other persons whose total income exceeds the maximum amount not chargeable to tax must file a return【263†L5-L10】. Certain entities such as business trusts, investment funds, and persons with foreign assets must file regardless of income【263†L10-L17】.
Q12: What are the due dates for filing return of income?
| Category | Due Date |
|---|---|
| TP cases | November 30 |
| Companies | July 31 |
| Audit cases (non-company) | July 31 |
| Non-audit individuals | May 31 |
Q13: Can a return be revised?
Under Section 263(5), if any person discovers any omission or any wrong statement in the return, he may furnish a revised return within twelve months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier【263†L35-L37】.
Q14: What is an updated return?
Under Section 263(6), any person may furnish an updated return within forty-eight months from the end of the financial year succeeding the relevant tax year【263†L40-L41】. Additional income-tax is payable at rates ranging from 25% to 70% depending on when the updated return is filed【267†L5-L14】.
Assessment
Q15: What is the procedure for assessment?
Under Section 270, where a return has been made, it shall be processed to compute total income after making adjustments for arithmetical errors, incorrect claims, and other prescribed inconsistencies【270†L4-L15】. An intimation shall be sent to the assessee specifying the sum payable or refund due【270†L16-L17】.
Q16: What is a regular assessment?
Under Section 270(10), the Assessing Officer may serve a notice on the assessee and, after hearing such evidence as the assessee may produce, make an assessment of the total income or loss【270†L40-L45】.
Q17: What is best judgment assessment?
Under Section 271, if a person fails to furnish the return or fails to comply with the terms of a notice, the Assessing Officer may make the assessment of the total income or loss to the best of his judgment【271†L4-L8】.
Expert Legal Guidance
Anuj Desai & Associates provides comprehensive legal advisory services on direct tax compliance. Our direct tax experts help taxpayers understand their obligations, file returns correctly, and navigate the regulatory framework. We assist in compliance planning, filing, and representation before income-tax authorities.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on direct tax compliance or any other matter, please consult qualified legal professionals.
Need Expert Legal Guidance?
Navigating the complex direct tax compliance framework requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive direct tax advisory services, including:
- Compliance Planning: Strategic planning for compliance
- Filing Assistance: Assistance with return filing and reporting
- Representation: Representation before income-tax authorities
- Risk Management: Mitigating compliance risks
Contact us for expert legal guidance on your direct tax matters.