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TMI BlogContinuity and Reform in Tax Relief for Irregular Income : Clause 157 of the Income Tax Bill, 2025 Vs. Section 89 of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, has long provided a framework for mitigating the adverse tax impact of such receipts. The legislative evolution, contextual necessity, and practical impact of these provisions are significant, especially in a legal regime where the timing of income receipt can disproportionately affect tax liability. This commentary examines Clause 157 in detail, analyzes its objectives, compares it with the existing legal framework, and discusses its implications for taxpayers and tax administrators. Objective and Purpose The principal objective behind Clause 157, as well as its predecessor Section 89 and associated Rule 21AA, is to ensure tax equity and fairness. The Income Tax law is based on the principle of taxation according to the ability to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and pensioners. The inclusion of 'profits in lieu of salary' and 'family pension' ensures that the relief is not limited to conventional salary but extends to analogous receipts, in line with the broadening definition of income from employment. 2. Trigger for Relief The relief is triggered when the total income is assessed at a higher rate due to such receipts. The provision thus requires a causal link between the receipt in question and the higher tax rate. This is conceptually consistent with the principle that relief is warranted only when the taxpayer is disadvantaged by the bunching of income. 3. Application Process Relief is not automatic; it is contingent upon an application by the assessee to the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arrears are received. The triggering condition is that the total income is assessed at a higher rate due to such receipt. * Procedural Requirement: Relief is granted upon application to the Assessing Officer. * Prescribed Relief: The quantum of relief is as prescribed, typically detailed in the rules. * Proviso: Section 89 contains a specific proviso denying relief for amounts received on voluntary retirement or termination if an exemption has already been claimed u/s 10(10C), thus preventing double benefits. Comparison: Clause 157 largely mirrors Section 89 in substance and structure. The primary difference lies in the cross-referencing of the deduction exclusion: Clause 157(2) refers to Section 19(1)(Table: Sl. No. 12), whereas t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome to prior years or the manner of calculating the notional tax) can significantly affect the quantum of relief. * Procedural Aspects: The application process, documentation, and time limits for claiming relief are not detailed in Clause 157. These aspects will be critical for effective administration and taxpayer compliance. * Interaction with Other Provisions: The exclusion in sub-clause (2) is linked to deductions u/s 19(1). The scope and content of this deduction will need to be carefully examined to avoid unintended overlaps or exclusions. Practical Implications The practical significance of Clause 157, as with its predecessor, is substantial for the following stakeholders: * Employees and Pensioners: The provision is a life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses where salary, profits in lieu of salary, or family pension is received in arrears or advance, resulting in higher tax rates. The scope of receipts is largely identical, though the specific cross-references to definitions and deduction provisions differ, reflecting the new legislative structure. The anti-abuse exclusion in Clause 157(2) is similar in intent to the proviso in Section 89, though the reference is now to Section 19(1) rather than Section 10(10C). This may indicate a harmonization or re-categorization of deductions and exemptions in the new Bill. 2. Procedural Mechanism Both regimes require an application by the taxpayer, with the manner and computation of relief left to be prescribed in the rules. Rule 21AA continues to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferences in the scope and quantum of relief. Conclusion Clause 157 of the Income Tax Bill, 2025, represents a continuity of the legislative intent and substantive relief provided under Section 89 of the Income Tax Act, 1961, and Rule 21AA of the Income-tax Rules, 1962. The provision remains a critical safeguard against the inequitable tax impact of lump-sum receipts of salary, profits in lieu of salary, and family pension in arrears or advance. The delegation of computation and procedural details to the rules ensures flexibility and administrative efficiency, though it places a premium on clear and timely rule-making. The comparative analysis demonstrates that while the structure and objectives remain aligned, the specific reference ..... X X X X Extracts X X X X X X X X Extracts X X X X
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