So far, income tax authorities had the power to conduct searches and seize assets and books of accounts if they had reason to believe that an individual was evading taxes. The new income tax (I-T) bill extends this power to the "virtual digital space".
Published Mar 05, 2025 | 9:21 PM ⚊ Updated Mar 05, 2025 | 9:21 PM
Synopsis: The Income Tax Bill 2025 empowers tax authorities to access and scrutinise individuals’ social media accounts, emails, bank accounts, and other digital platforms in guise of detecting tax evasion. This expansion of power, under Section 247 of the bill, defines “virtual digital space” as any online environment used for communication, transactions, or asset storage, encompassing cloud servers, banking platforms, and social media accounts. (This piece was originally published on thewire.in)
Starting 1 April 2026, income tax authorities will be able to access and scrutinise every person’s social media accounts, personal emails, bank accounts, online investment accounts, trading accounts and more.
Authorities will be able to override access to digital platforms if they suspect that the individual has evaded income tax or if they have reason to believe that the person has any undisclosed income, money, gold, jewellery or valuable item or property on which the applicable income tax has not been paid as per the Income Tax Act 1961.
As per Section 132 of the existing I-T Act 1961, so far, income tax authorities had the power to conduct searches and seize assets and books of accounts if they had information and reason to believe that an individual had any undisclosed income, property, or documents that they were hiding to evade taxes.
This allowed them to break open the lock of any door, box or locker in case their keys were unavailable and if they had reason to suspect that any undisclosed assets or books of accounts were being kept there.
However, the new I-T bill extends this power to a citizen’s mobile phones and computer systems, under what they call the “virtual digital space”.
The powers mentioned under Section 247 of the Income Tax Bill 2025 state:
“…break open the lock of any door, box, locker, safe, almirah, or other receptacle for exercising the powers conferred by clause (i), to enter and search any building, place, etc., where the keys thereof or the access to such building, place, etc., is not available, or gain access by overriding the access code to any said computer system, or virtual digital space, where the access code thereof is not available.”
The new bill goes on to define “virtual digital space” as follows:
“An environment, area or realm, that is constructed and experienced through computer technology and not the physical, tangible world which encompasses any digital realm that allows users to interact, communicate and perform activities using computer systems, computer networks, computer resources, communication devices, cyberspace, internet, worldwide web and emerging technologies, using data and information in the electronic form for creation or storage or exchange.”
These include email servers, social media accounts, online investment accounts, trading accounts, banking accounts, etc., any website used for storing details of ownership of any asset, remote server or cloud servers, digital application platforms, and any other space of similar nature.
What is not defined in the Act is the extent of the “reason to believe” of authorities. This means that income tax officers could override access to “any said computer system, or virtual space” on mere suspicion of tax evasion.
As a result, it has led to concerns regarding digital privacy of users.
“Your email and social media account can be accessed by income tax officers starting next financial year in these cases – this is an assault on our rights! Government should provide safeguards against misuse, get a court order before this,” said former Infosys chief financial officer (CFO) Mohandas Pai, in a post on X, tagging the prime minister.
Speaking to the Economic Times, Sonam Chandwani, Managing Partner at KS Legal and Associates, said, “While the government may justify it as a measure to curb tax evasion and undisclosed digital assets, the broad and vague definition of virtual digital space (VDS) essentially allows unrestricted surveillance over an individual’s financial and private digital presence.”
“In the absence of judicial oversight or specific procedural safeguards, this provision risks becoming a tool for arbitrary scrutiny rather than a structured tax enforcement mechanism. The new Income Tax Bill lacks clear procedural checks, potentially leading to unrestricted data harvesting and fishing expeditions against businesses, professionals, and individuals,” she said.
Considering the digital advancement of today’s world, bringing the digital space under tax scrutiny is important. However, experts have raised concerns that the new I-T bill in its current form provides unrestricted access to tax authorities, contradicting data privacy principles.
Such broad surveillance powers without safeguards hamper an individual’s privacy rights, thus proving a challenge to Article 21 of the Constitution.
In the hearing for Justice KS Puttaswamy v Union of India, 2017, the Supreme Court observed that the right to privacy is “a sacrosanct facet of Article 21 of the Constitution” and that any intrusion by the state must pass the “test of legality”.
Furthermore, the unrestricted surveillance under the new I-T bill also challenges Article 19(1) of the Constitution, the right to freedom of speech and expression of an individual, making it legally fragile and questionable.
(This piece was originally published on thewire.in and has been reproduced with permission.)
