The Indian government has introduced the Income Tax Bill 2025, a major overhaul of the country’s tax laws, granting unprecedented investigative powers to tax authorities. While presented as a move to modernize tax compliance, the bill includes provisions that allow tax officers to access digital assets, emails, social media profiles, trading accounts, and cloud storage in cases of suspected tax evasion.Finance Minister Nirmala Sitharaman introduced the bill in Parliament, stating that it replaces the six-decade-old Income Tax Act of 1961. However, one of the most debated aspects of the bill is Clause 247, which significantly expands the tax department’s authority by allowing them to search and seize information stored in what is now legally defined as "virtual digital space."This provision allows designated tax officers to override security settings, access private files, and demand digital records without prior consent if they suspect undisclosed assets or income tax fraud. The bill is currently under review by a select parliamentary committee and is set to take effect on April 1, 2026, if passed.
 

Digital Access and Surveillance Powers Under the New Tax Law

Under the existing tax framework, income tax officials can search physical premises, demand financial records, and access electronic devices such as laptops and hard drives. However, due to legal loopholes and privacy laws, accessing emails and social media accounts was often challenged in court.With the introduction of Clause 247 in the Income Tax Bill 2025, tax authorities will now have legal backing to access taxpayer data stored in digital platforms, including:

• Emails and cloud storage accounts
• Social media activity, private messages, and linked financial transactions
• Trading accounts and investment portfolios
• Encrypted files and private financial records

The bill explicitly states that if a taxpayer refuses to provide access, tax officers have the right to bypass passwords, override security measures, and retrieve necessary information to complete their investigations.
 

The legal provision reads:

"Tax officers will have the right to break open the lock of any door, locker, safe, almirah, or other receptacle for exercising their powers. If required, they can override access codes to any said computer system or virtual digital space where access is not available."

This means that tax searches will no longer be limited to physical assets or traditional banking transactions—officials can now directly examine digital footprints, communications, and online financial activities.
 

Privacy Concerns and Legal Debate Surrounding the Bill

The introduction of expanded digital search powers has raised serious concerns about privacy, misuse of authority, and potential overreach by tax officials. Legal experts warn that the bill eliminates safeguards that previously prevented unnecessary digital intrusions, potentially subjecting individuals and businesses to unwarranted scrutiny.Vishwas Panjiar, a tax expert at Nangia Andersen LLP, highlighted that the bill represents a major departure from existing tax laws, which previously did not explicitly allow access to digital platforms. He warned that without clear restrictions and oversight, these new powers could result in taxpayer harassment and excessive government surveillance.
 

Similarly, Sanjay Sanghvi, a partner at Khaitan & Co, pointed out that while tax authorities have previously demanded digital access, such actions were often challenged in court due to the absence of legal provisions. The new bill removes this ambiguity, making it mandatory for taxpayers to comply with digital information requests.Critics argue that the lack of independent oversight on tax searches could increase the risk of data misuse, and unless specific guidelines on data access, storage, and retention are included, taxpayers could be exposed to excessive scrutiny without legal recourse.
 

Impact on Taxpayers and Businesses in India

With expanded tax investigation powers, individuals and businesses will need to be more vigilant about how they manage their digital financial transactions, online investments, and encrypted records. The bill makes it crucial for taxpayers to:

• Ensure all financial transactions are documented and compliant with tax laws.
• Secure sensitive digital data, considering the legal ability of tax officers to access virtual spaces.
• Monitor social media activities, as tax authorities may now analyze financial activity linked to digital footprints.
• Comply with new KYC (Know Your Customer) and tax reporting regulations to avoid being flagged.

The Income Tax Bill 2025 is expected to be debated in Parliament, with opposition leaders and privacy advocates calling for stricter safeguards to prevent misuse of investigative powers.
 

If passed without amendments, the law will reshape how tax investigations are conducted in India, effectively expanding the government’s ability to track and access financial information stored online. While the objective is to curb tax evasion, critics believe that without independent oversight and data protection mechanisms, the bill could lead to excessive surveillance and loss of privacy rights for taxpayers.As the government pushes forward with its tax reforms, the next few months will determine whether the controversial digital access provision is modified, challenged, or upheld. For now, taxpayers must prepare for increased financial scrutiny as India’s tax compliance landscape evolves with new digital regulations.