The Income Tax Bill 2025, introduced by the Indian government as a complete overhaul of the 1961 Act, seeks to modernize tax administration and enforcement mechanisms. A key and controversial provision of this Bill is the explicit legal empowerment of income tax officers to access digital data—including private emails, WhatsApp chats, social media accounts, cloud storage, and encrypted devices—during search and seizure operations.
Amid growing public concern over digital privacy and surveillance, the Parliamentary Select Committee, tasked with reviewing the Bill, has chosen to retain these provisions without any dilution or safeguards. The Committee, in its report tabled in Parliament on July 21, 2025, held that these powers are necessary to keep pace with technological advancements and are aligned with similar powers already available under the current Income-tax regime.
This decision has sparked intense debate, with privacy advocates, legal experts, and civil society questioning the proportionality, transparency, and potential for misuse of such sweeping digital access rights by tax authorities.
In this context, understanding the scope, rationale, and implications of these retained provisions becomes critical for taxpayers, professionals, and constitutional watchdogs alike.
🕵️♂️ What the Select Committee decided
The Lok Sabha Select Committee, chaired by MP Baijayant Panda, retained without amendment the clause in the Income Tax Bill (2025) that empowers tax officers during search and seizure operations to:
- Require individuals to provide any technical assistance, including passwords, PINs, and login credentials, for accessing their “virtual digital spaces” (like email accounts, WhatsApp, Facebook, trading/banking platforms, cloud storage, etc.);
- Override or forcibly break access controls if the taxpayer refuses or is unable to provide credentials.
The committee’s 4,575‑page report, tabled in Parliament on July 21, 2025, concluded that this digital access is merely a clarification of similar powers under the existing Income‑Tax Act (Section 132) and is necessary to prevent concealment of incriminating evidence in encrypted platforms.
Why it matters
- Broad scope: “Virtual digital space” is very broadly defined—covering email servers, social media, cloud storage, financial apps, etc.
- Forced compliance: Tax officers may override passwords or use technical means to break encryption if the taxpayer is uncooperative.
- Classified as normal procedure: These powers apply only during search or seizure operations, not routine assessments, though critics argue this still represents a major expansion of state surveillance.
Concerns raised
- Privacy advocates (like the Internet Freedom Foundation) worry this could violate the right to privacy, as affirmed in the K.S. Puttaswamy judgment, with risks of unchecked surveillance and misuse.
- Calls were made to introduce safeguards such as:
- Pre‑recorded written reasons for accessing private digital accounts;
- Excluding purely personal social media from the scope;
- Limit use of extracted data strictly to tax investigations.
These suggestions were rejected by the Committee as “not feasible” and they believe current protections are sufficient.
Summary
| Aspect | Status after Committee Review |
|---|---|
| Clauses on digital access | Retained without change |
| Password override power | Yes – explicitly allowed |
| Scope of use | Emails, social media, cloud, banks, trading, etc. |
| Safeguards introduced | None additional |
| Justification | Clauses clarify existing powers and aid modern investigations |
What’s next?
- The Bill, as recommended, will proceed to Parliament without changes on this front.
- If passed, these powers could come into force from April 1, 2026, as per PRS Legislative Research.
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Privacy and civil‑liberties groups may now challenge these provisions through judicial or legislative avenues.