© The Indian Express Pvt Ltd
Tags:
Journalism of Courage
A small phrase in the proposed Income Tax Bill, 2025, around search and seizure powers available to the government, has raised privacy concerns among digital rights activist and many tax consultancy firms — since the bill allows the government to break open, or “override” access controls, such as passwords, set up by users for their digital communication on social media platforms, email services, and possibly even communication on encrypted platforms such as WhatsApp.
While tax officials maintain that the Income-tax Bill has made no changes to the search and seizure provisions in the extant Income Tax Act, and any changes to the language have been made to make it easier to understand, there is one major addition in the bill, which is absent in the Act — the ability of income tax officers to override any access codes a person may have set on their phones or laptops.
The I-Tax Act grants tax authorities the power to enter and search premises and forcibly open locks if an individual fails to provide requested documents or financial records after receiving an official summons. The legislation also authorises officials to examine electronic records. The proposed bill maintains these existing provisions while additionally empowering authorities to access virtual digital environments during search and seizure operations, including the ability to override any access codes of computer systems, or “virtual digital spaces,” that would otherwise restrict entry.
The bill defines a virtual digital space as a digital environment that is constructed and experienced through computer technology, and includes: (i) email servers; (ii) social media account; (iii) online investment account, trading account, banking account, etc.; (iv) any website used for storing details of ownership of any asset; (v) remote server or cloud servers; (vi) digital application platforms; and (vii) any other space of similar nature.
This would mean that if the provision is retained in the Bill once it clears scrutiny from a Select Committee of Parliament, tax officials investigating an individual for potential tax evasion, or under-reporting income, could either use password-breaking software, or request companies that offer communication services to bypass a person’s log-in credentials. “Even phone companies like Apple could possibly be required to assist with breaking a person’s passcode,” a tax expert said, requesting anonymity.
Privacy advocates believe that if the Digital Personal Data Protection Act would have been in force right now (the Act has still not been implemented, with draft rules currently undergoing consultation), it would make no difference to the proposal in the Income-tax Bill, since tax authorities are likely to be exempted from the privacy law’s scope — a criticism that has been levelled against the law for affording wide-ranging exemptions to government agencies.
Officials said that under Section 132 of the existing I-T Act, tax authorities have been seizing electronic devices such as desktops and hard disks, and collecting evidence from communication platforms such as emails, WhatsApp, and Telegram. An official said that such evidence is crucial in calculating the amount of tax evasion.
Another tax expert, speaking on condition of anonymity, said that the tax authorities were already asking people under scrutiny to provide them access to their online communications or documents, but overriding access controls remained a grey area legally. “With the proposed change, they want to explicitly make it clear that the government has the power to bypass these protections for those under the tax lens. Of course, some safeguards need to be there,” said the person cited above.
“This represents a notable departure from the present Income-tax Act, 1961, which did not explicitly cover such digital domains… Without clear safeguards, these extensive powers could lead to taxpayer harassment or unnecessary scrutiny of personal data,” news agency Reuters reported, quoting Vishwas Panjiar, a partner at law firm Nangia Andersen LLP.
In a letter to the Select Committee of Parliament, which is currently deliberating on the bill, the Delhi-based digital rights body Internet Freedom Foundation (IFF) said that it was “necessary to ensure that the proposed digital search and seizure provisions uphold constitutional safeguards and prevent excessive enforcement powers”.
The bill should “explicitly incorporate the proportionality standard,”, as established by the Supreme Court in its landmark 2017 right to privacy judgment, “by requiring the least invasive methods,” IFF said. “Without these necessary safeguards, the Income-tax Bill, 2025, risks enabling unchecked surveillance and infringing on privacy rights.”
