TaxTMI 
TaxTMI 
Legal Framework for Technological Innovation in Tax Administration : Clause 532 of the Income Tax Bill, 2025 Vs. Section 157A of the Income-tax Act, 1961
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....ope is general, providing a statutory mechanism for the Government to innovate and adapt administrative processes, particularly through technological means and organisational restructuring. Section 157A of the Income-tax Act, 1961, inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, represents a more targeted intervention. It empowers the Central Government to notify a scheme for faceless rectification, amendment, and issuance of notices or intimations under specified sections of the Act. Section 157A was a legislative response to the growing demand for minimising physical interface between taxpayers and the tax department, thereby reducing discretion, corruption, and inefficiencies. Both pro....
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....he Indian tax administration from a manual, paper-based system to a technology-driven, faceless, and process-oriented regime. The introduction of faceless assessment, appeals, and rectification over the past decade has been a significant milestone. Section 157A, introduced in 2020, was a specific measure to extend the faceless regime to rectification and related procedures. Clause 532, however, generalises this power, untethering it from specific sections and enabling its application to any aspect of the Act. Detailed Analysis of Clause 532 of the Income Tax Bill, 2025 Sub-section (1): Power to Frame Schemes "The Central Government may, by notification, make a scheme for any of the purposes of this Act, so as to impart greater efficiency....
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.... Act shall not apply or shall apply with such exceptions, modifications and adaptations as specified in the notification." This is a crucial enabling provision. It authorises the Government to modify the application of any provision of the Act for the purpose of implementing a notified scheme. This may include: * Exempting certain provisions from application in the context of a scheme. * Applying provisions with modifications or adaptations tailored to the scheme's operational requirements. The effect is to create a mini-legislative power, subject to the boundaries set by the parent Act and the requirement of notification. This flexibility is essential for the operationalisation of innovative schemes, which may not fit neatly with....
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....nce costs, subjectivity, and harassment. However, it also requires taxpayers to be digitally literate and have access to requisite infrastructure. * Tax Administration: The provision enables the reorganisation of administrative processes, creation of specialised units, and adoption of best practices in public administration. It also places a premium on technological capacity and data security. * Legal Certainty: The power to modify the application of the Act's provisions may lead to concerns about legal certainty and uniformity. The requirement of notification and parliamentary oversight partially mitigates this risk. * Regulators and Policymakers: The provision gives significant operational flexibility to respond to emerging chal....
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.... (though the broader power would allow it). Delegated Legislative Power * Section 157A(2): The power to modify provisions of the Act is present, but subject to a temporal limitation: "no direction shall be issued after the 31st day of March, 2022." This sunset clause restricts the duration of the delegated power. * Clause 532(2): No such time limit is prescribed. The power is open-ended, subject only to the requirement of notification and parliamentary laying. Continuity and Transition * Section 157A: There is no express provision for modification of existing schemes notified under previous law. * Clause 532(3): Provides an explicit mechanism for the Government to amend or modify schemes notified under the 1961 Act, ensuring conti....
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....ties and Issues in Interpretation Extent of Modification Power - Clause 532(2) authorises the Government to specify that any provision "shall not apply or shall apply with such exceptions, modifications and adaptations as specified." The breadth of this language raises questions about: * Whether core substantive rights or obligations under the Act could be modified via notification, or whether the power is limited to procedural or administrative provisions. * The standard of judicial review applicable to such notifications-whether courts would scrutinise the reasonableness, necessity, or proportionality of the modifications. Safeguards and Limitations - While the requirement of laying notifications before Parliament provides a measure....