The Income Tax Act ensconces roughly 100-plus provisions under one cardinal number 115 (coded alphanumerically) in various myriad permutations and combinations spread across 16 chapters, from XII to XII-H, with A, B, BA, BB, BC, etc., also inserted in between.

Of these provisions, two chapters, tonnage tax and fringe benefit tax (FBT), contain around 46 sections . The rest of the provisions are spread across the remaining 14 chapters, and some of the chapters having only one section.

For instance, the new virtual digital asset taxation comes under Section 115BBH. Coincidentally, its predecessor, Section 115BBG, is taxation of carbon credits/certified emission reductions (CERs) — something ‘intangible, thus virtual’. While dividends received by domestic companies from their foreign holdings falls under Section 115BBDA,  Section 115BAD is on tax on certain resident co-operative societies.

The choice of numbering sections/chapters, their insertion, the amendments, renumbering, etc., are undoubtedly the exclusive privilege of the legislature. It may choose in its wisdom to name a Section 115BLURB/115SLURP/115OOPS, which definitely is out of syllabi for us.

Scheduler system

What is worrisome is a number of entrants under a section are standalone coded provisions by themselves. The universal scheduler system of taxation is per Section 14, which only suggests that “all incomes may be classified under the 5 possible heads” — salary, house property, profits and gains of business or profession, capital gains, and income from other sources.

Undoubtedly, the existence of a scheduler system and its adherence brings greater sanity to the provisions/law besides helping fit income into its right genre. Post this income fixation, rest of the allowances, carve-outs, provisos, sub-sections, etc., become possible, supporting the fitment. For instance, no depreciation provision is available under house property, so is no standard deduction under business income.

Courts have also endorsed the edifice of scheduler system of taxation. No doubt there exists other standalone sections as well that carve out incomes outside the scheduler system, meant for a specific intent/purpose. Certain generic chapters like carry forward, set-off provisions and deductions remain in one place logically so that they capture the essence and spirit of the law under various heads of taxation.

It is only when carve-outs proliferate in all possible manner, the law becomes extremely complex. The core issue is: Into what head does a particular income fit in, especially if it is not correlated to kick in provisions under types of incomes i.e,. salary (under Section 17), house property (Section 22), business income (Section 28), capital gains (Section 45) and residual head other sources (Section 56).

At times, when specific carve-out provisions are introduced, they fall short, missing core aspects on allowability of expenditure, allowances and offsets, resulting in parochial/wrong reading of the sections and making them meaningless eventually. They also usher in a parade of amendments to equip/supply/fill the missing paraphernalia.

A little bit of logical, sequential, sensible fitting of sections, provisions, chapters will definitely make the law simpler and palatable.

The writer is a chartered accountant