First Schedule of the IT Act: Before and After the 2022 Amendment

The First Schedule decides which documents the IT Act will not touch. For thirteen years after 2009 it listed five entries. In 2022 a single notification rewrote two of them and deleted a third. This note sets the before and after side by side, explains why the change was made, traces its practical effects on lending, housing finance, capital markets and real estate, identifies what did not change and the questions that remain, and compares India's approach with that of other jurisdictions. Topic 32 gives the full note on Section 1 and each entry, and Topic 33 the immovable property entry in detail.

1. Redrawing the Map

Think of the First Schedule as a map with a few areas shaded out, marked 'electronic documents not recognised here'. In 2022 the map was redrawn: one shaded area was erased entirely, and two others had corridors cut through them for banks, insurers, market intermediaries and pension funds. Two areas, trusts and wills, remain fully shaded.

Figure 1: The First Schedule over time

2. The Notification

• Instrument. Notification S.O. 4720(E) issued by the Ministry of Electronics and Information Technology under the proviso to Section 1(4)
• Dates. Dated 26 September 2022 and published in the Official Gazette on 6 October 2022.
• Parliamentary control. Laid before each House of Parliament under Section 1(5)

3. Entry by Entry

Figure 2: The First Schedule before and after 2022

• Entry 1: negotiable instruments. Before: all negotiable instruments other than cheques were excluded. After: demand promissory notes and bills of exchange issued in favour of or endorsed by entities regulated by the RBI, NHB, SEBI, IRDAI or PFRDA are also outside the exclusion.
• Entry 2: powers of attorney. Before: all powers of attorney were excluded. After: powers of attorney empowering such regulated entities to act for, on behalf of and in the name of the executant are outside the exclusion.
• Entry 3: trusts. Unchanged: trusts under Section 3 of the Indian Trusts Act remain excluded.
• Entry 4: wills. Unchanged: wills and other testamentary dispositions remain excluded.
• Entry 5: immovable property contracts. Before: any contract for the sale or conveyance of immovable property or any interest in it was excluded. After: the entry is omitted.

4. Why the Change Was Made

• Digital lending. Lending had moved online: loan applications, e-KYC, e-mandates and e-signatures were routine, but the demand promissory note, the power of attorney to the lender and the property security documents still required paper. The RBI issued guidelines on digital lending in September 2022, underlining the shift.
• Industry demand. Banks, NBFCs, housing finance companies, e-stamping and e-signature providers had sought these changes to enable end-to-end paperless loan documentation.
• Regulatory comfort. Limiting the new exceptions to instruments involving entities regulated by the five financial regulators ensured that a supervised party is always involved, reducing the risk of fraud.
• Technology maturity. Aadhaar-based e-Sign, digital signature certificates and e-stamping had matured since 2015, making reliable electronic execution possible.

5. Effects

Figure 3: Who gained and what stayed the same

• Lenders and borrowers. Loan agreements, demand promissory notes, powers of attorney in favour of the lender and property-related security documents can be executed electronically, with e-stamps where State law permits, reducing cost and turnaround time.
• Capital markets, insurance and pensions. Powers of attorney to brokers, depositories, insurers and pension intermediaries can be e-signed.
• Real estate. Agreements to sell and other property contracts are within the IT Act, though registration and stamp law continue to govern transfer (see Topic 33)
• Trade finance. Bills of exchange involving regulated entities can be handled electronically.

6. What Did Not Change

• Trusts and wills. Remain wholly excluded.
• Private instruments. Promissory notes and bills between private persons, and powers of attorney to anyone other than a regulated entity, remain excluded.
• Other laws. Registration, stamp duty, attestation and notarisation requirements under other statutes are untouched; the amendment only removes the IT Act's own bar.
• Cheques. Already outside the exclusion since 2008.

7. Open Questions

• Scope of the qualifier. Whether 'issued in favour of or endorsed by' a regulated entity qualifies both demand promissory notes and bills of exchange, or only bills, has been debated; the purposive reading applies it to both.
• Which entities. 'Regulated by' clearly covers banks, NBFCs, housing finance companies, stockbrokers, depository participants, insurers and pension entities, but the position of unregulated fintech partners in co-lending or distribution arrangements is less certain.
• Registration and stamp. The benefit of the property entry's omission depends on how quickly States permit electronic stamping and registration.
• Transferable records. India has not adopted the UNCITRAL Model Law on Electronic Transferable Records, 2017, so a general legal framework for electronic negotiable instruments between private parties is still missing.

8. Comparative Practice

• UNCITRAL. The Model Law on Electronic Commerce allows States to exclude situations in which electronic equivalents are not appropriate.
• United States. The federal E-SIGN Act, 2000 excludes wills, codicils and testamentary trusts, and certain family law matters, from its rule of electronic validity.
• The common pattern. Most legal systems keep wills and similar documents outside electronic transaction laws because of the need for attestation and the risk of fraud, while commercial and financial instruments are progressively brought in.

9. Quick Revision and Memory Aids

• 'Two narrowed, one erased, two untouched'. The five entries.
• 'S.O. 4720(E): 26 September, published 6 October 2022'. The notification.
• 'Corridors for the five regulators'. RBI, NHB, SEBI, IRDAI, PFRDA.
• 'Paperless lending was the purpose'. Why.
• 'Wills and trusts stay shaded'. What did not change.

10. Frequently Asked Questions

What changes did the 2022 notification make to the First Schedule?

It narrowed entry 1 to exclude from the bar demand promissory notes and bills of exchange involving RBI, NHB, SEBI, IRDAI or PFRDA regulated entities, narrowed entry 2 to exclude powers of attorney empowering such entities, and omitted entry 5 on contracts for sale or conveyance of immovable property. Trusts and wills were left unchanged.

11. Related Topics

• Topic 32: Section 1 and the First Schedule. Complete note.
• Topic 33: Immovable Property Contracts. The omitted entry.