Direct Tax Code debate

Story hook

On 23 July 2024, in her seventh consecutive Union Budget, Finance Minister Nirmala Sitharaman announced what veteran tax practitioners called the most consequential income-tax sentence in a decade: a comprehensive review of the Income-Tax Act, 1961, to be completed within six months. The goal — "to make the Act concise, lucid, easy to read and understand" — sounded modest. The subtext was anything but.

For nearly two decades, India has been groping toward a Direct Tax Code (DTC) — first proposed by Finance Minister P. Chidambaram in 2009, formalised as DTC Bill 2010, redrafted by the Akhilesh Ranjan Task Force in August 2019, then quietly shelved. The 1961 Act, in the meantime, has accumulated roughly 500 sections, 14 schedules, ~5,000 amendments, and a fact-checked 15 lakh pages of judicial commentary.

The 23 July 2024 Budget chose a different path: not a brand-new Code, but a rewrite of the 1961 Act. A six-member review committee, headed by Revenue Secretary Sanjay Malhotra, began work the next month. By February 2025 the rewrite would be tabled in Parliament as the Income-Tax Bill, 2025. What this means for the salaried middle class, the corporate sector, and India's chronically narrow tax base is the story behind the story.

Why this matters for UPSC

Direct Tax Code reform falls under GS-III Indian Economy ("government budgeting", "resource mobilisation"). Mains has asked DTC and personal-tax-reform questions at least twice in the last decade (2017, 2021). Prelims tests slab structures, key features of the new regime, and notable amendments. Interview panels probe the candidate's view on whether India should adopt a pure rates-and-base approach or retain savings-incentive exemptions like 80C.