Income Tax Bill: Where it is lost

By discarding provisos and explanations, the draft law weakens legal coherence and undermines interpretive safeguards.

Among the many concerns raised by experts about the proposed 2025 Income Tax Bill – currently under scrutiny by a select committee of Parliament and scheduled for discussion in the upcoming monsoon session – one issue quietly undercuts the intent of modernisation: the Bill’s abandonment of interpretive hierarchy in legislative drafting. Intended to replace the current Income Tax Act, 1961, the Bill seeks to simplify structure and language. But in doing so, it discards ‘provisos’ and ‘explanations’, instead recasting conditions and exceptions as separate, co-equal sub-sections. This is more than a mere change in drafting style.

This shift echoes a broader legislative trend seen in the criminal law re-enactments of 2023, which replaced the Indian Penal Code, the Code of Criminal Procedure, and the Indian Evidence Act with new texts. While the layout has changed, many substantive difficulties – whether over ‘common intention’, ‘cognisance’, or procedural rigour – remain untouched.

To understand what is lost in the Bill’s draft, one must appreciate the function of the proviso. A proviso appears after the main clause of a section and typically begins with phrases such as “provided that”, “provided further that”, or “provided also that”. Its role is to qualify, limit, or carve out exceptions to the general rule. Similarly, an explanation at the end of a section clarifies definitions or scope. Together, they shape a statute into a layered structure of primary rule, conditional requirements (if any), exception, and clarification.

Take a simple fiscal example: current Section 80DDB of the Income Tax Act allows a deduction of up to Rs 40,000 for expenditure on the treatment of specified diseases. But this main relief is conditioned by a chain of provisos – first, the expense must be supported by a prescription from a specialist; second, any reimbursement from insurance or an employer reduces the deductible amount; third, if the patient is a senior citizen, the upper cap of Rs 40,000 is raised to Rs 1,00,000. These provisos are logically subordinated to the main clause, signalling to the taxpayer and the assessing officer how to interpret the provision in a tiered, coherent manner. The section then concludes with explanations defining the terms “dependant” and “senior citizen”.

The revised Clause 128 of the 2025 Bill preserves the substance but not the structure. It breaks the entire scheme into five sub-sections: the main deduction rule appears in sub-section (1); the prescription requirement in sub-section (2); the reimbursement adjustment in sub-section (3); the higher deduction for senior citizens in sub-section (4); and definitions in sub-section (5). Each reads like a standalone rule. But taken together, they obscure the hierarchical relationship that once clearly connected conditions to qualifications and exceptions to rules.

This flattening creates interpretive uncertainty. A reader could misread sub-section (4) as an independent entitlement, assuming any senior citizen is eligible for a Rs 1,00,000 deduction regardless of whether the expense qualifies under sub-section (1) or whether the prescription requirement in sub-section (2) is met. While such an interpretation would be incorrect, the current layout no longer guards against it.

A similar issue could arise if Section 24(b), which governs housing loan interest deductions, were redrafted. If the proviso restricting
deduction unless the property is completed within five years were restructured as an equal sub-section, it might appear discretionary rather than mandatory.

The importance of legislative form in statutory interpretation has long been recognised in both common law and Indian jurisprudence. In Sundaram Pillai vs Pattabiraman (1985), the Supreme Court of India held that a proviso serves to qualify the main enactment, cautioning that its improper (non)use could distort the legislative intent. Similarly, in T Sesharathamma vs Manikyamma (1991), the court underscored that the placement and phrasing of clauses – including provisos and explanations – are vital to discerning statutory purpose. These rulings affirm that drafting structure is not cosmetic; it is functional, shaping how laws are interpreted and applied.

Even under Clause 128, senior citizens must still meet every foundational requirement: the illness must be among the specified diseases listed in the rules; treatment must be certified by a designated medical specialist such as a neurologist or oncologist; and any amount reimbursed – whether by insurance or the employer – must be deducted. None of these conditions have been diluted. What has changed is their presentation: fragmented across co-equal sub-sections, they now appear detached and scattered. This altered form risks misleading even the diligent reader. What once unfolded as a single, logical thread now appears as a disjointed array – and the interpretive guardrails have quietly disappeared.

(The writer is an advocate in the Delhi High Court)