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Starting April 2026, India’s income tax rules will undergo a significant transformation, granting tax authorities the power to access private digital spaces. The proposed Income Tax Bill 2025 will allow tax officers to override access codes and enter digital platforms if they suspect individuals of concealing income or assets. The move aims to tackle modern tax evasion methods but has sparked widespread privacy concerns.
Expanded Search and Seizure Powers
Under the current Income Tax Act 1961, tax officers can break open physical spaces like lockers, safes, and almirahs if access is unavailable. The new bill expands this authority by introducing the concept of ‘virtual digital space’, enabling officials to access digital environments such as:
- Email servers
- Social media accounts
- Online investment, trading, and banking accounts
- Websites storing ownership details of assets
- Remote servers or cloud storage
- Digital application platforms
- Any other similar digital spaces
According to Clause 247 of the Income Tax Bill, tax officers can gain access to these digital spaces by overriding access codes if they believe the individual is deliberately evading taxes and access is otherwise unavailable.
According to clause 247 of the Income Tax Bill, if an authorised officer has reason to believe that an individual possesses undisclosed income or property that comes under the ambit of the I-T Act, they can ‘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,’” explained Rajarshi Dasgupta, Executive Director-Tax, AQUILAW to Business Standard.
What is Virtual Digital Space Under New Tax Bill?
The bill defines ‘virtual digital space’ as an environment constructed and experienced through computer technology, rather than the physical world. It encompasses any digital realm where users interact, communicate, or perform activities using:
- Computer systems
- Computer networks
- Communication devices
- Cyberspace
- Internet and worldwide web
- Emerging technologies
The inclusion of such a broad definition has raised questions about the extent of state surveillance and its potential impact on personal privacy.
Current Legal Framework: Income Tax Act 1961
Under Section 132 of the Income Tax Act 1961, tax officials have the power to search and seize physical assets if they suspect tax evasion. They can enter and search buildings, vehicles, or vessels where books of account, money, jewellery, or other valuables are suspected to be hidden. However, the current law does not extend these powers to digital platforms.
The bill’s expanded powers have sparked concerns about privacy violations, especially since there is no provision for judicial oversight. Unlike countries like the U.S. or the European Union, where tax authorities require a court order to access private data, India’s new framework allows tax officers to bypass this step entirely.
The bill is currently under review by a Select Committee of the Lok Sabha, following its introduction by Finance Minister Nirmala Sitharaman on February 13, 2025.
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