Tech Talk
Income Tax Authority Given Powers to Access Social Media and Email Servers
The upcoming Income-Tax Bill, 2025, proposes enhanced powers for tax officials, allowing them to access social media, online investment, trading, banking accounts, and email servers during tax investigations. This move is aimed at strengthening the ability of tax authorities to track financial activities and curb tax evasion.
A key highlight of the bill is the introduction of “virtual digital space” as a defined entity under Section 247, enabling tax officers to override access codes for digital platforms when necessary. The bill describes virtual digital space as “any digital realm that allows users to interact, communicate, and perform activities through computer technology.”
New Powers or Just a Reiteration?
Officials have clarified that this provision is merely a simplification of existing laws rather than an expansion of tax authorities’ powers. Currently, under Section 132 of the Income-Tax Act, 1961, tax officials already have the authority to inspect and seize electronic records, including emails, chat messages, and financial documents. However, the new bill explicitly includes virtual digital spaces, ensuring legal clarity in digital searches and seizures.
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As per the existing Section 132, tax officers can enter and search buildings, vehicles, aircraft, and other locations where assets, books of accounts, or incriminating documents may be hidden. They also have the authority to break open safes, locks, and storage units if necessary. The new amendment extends this power to digital assets, allowing officers to access computer systems, cloud storage, and online accounts where tax-related information might be concealed.
Key Provisions of the New Bill
1. Search and Seizure Expansion
– Tax authorities can now explicitly search virtual spaces for financial data.
– Access to emails, WhatsApp chats, Telegram messages, and cloud storage will be legally sanctioned.
2. Access Code Override
– If a person fails to provide credentials to a computer system or online platform, officials can override the access code to retrieve data.
3. Questioning Under Oath
– During searches, individuals in possession or control of digital assets may be interrogated under oath to extract relevant information.
Existing Digital Surveillance Practices
Sources confirm that electronic devices such as computers, hard drives, and mobile phones have already been seized in previous tax investigations. Authorities rely on digital communication records to prove tax evasion cases in court and calculate the extent of tax fraud.
The Finance Act, 2002, under Section 132(1)(iib), mandates individuals to facilitate access to electronic records upon demand. This includes providing login credentials and assisting tax officials in retrieving financial documents stored digitally.
A Step Towards a Modern Tax Framework
Introduced in the Lok Sabha last month, the Income-Tax Bill, 2025, aims to replace India’s six-decade-old direct taxation system with a streamlined, updated legal framework. By eliminating outdated provisions and integrating digital enforcement measures, the government seeks to modernize tax compliance and enforcement mechanisms.
The bill will now be reviewed by a Select Committee of Parliament before being debated and passed. If approved, the new law is expected to come into effect from April 1, 2026.