New income tax bill provisions grant wide search powers to authorities, make privacy of taxpayers vulnerable

On 13 February, finance minister Nirmala Sitharaman introduced the much-awaited bill to replace the existing Income-Tax Act, 1961. Among the changes proposed in the Income-Tax Bill, 2025, a significant one that cannot be overlooked is the extensive power granted to tax authorities to carry out searches of tax evaders.

The bill has introduced the term ‘virtual digital space’ in the provisions related to search and seizure actions. The definition of virtual digital space is rather broad and expressly includes email servers, social media accounts, online investment accounts, trading accounts, banking accounts, websites used to store details of ownership of assets, remote servers or cloud servers, and digital application platforms.

Digital India is the flagship programme of the present government. As such, digital platforms assure secure and seamless communication and storage of financial data and are the need of the day. However, these very platforms are also used as conduits for non-reporting of income or laundering of money. The definition of virtual digital space has therefore been introduced, with wide powers granted to the authorities to access these digital spaces while investigating tax evasion.

Although the government intercepts money laundering through search actions under laws such as the Income-Tax Act and the Prevention of Money Laundering Act, the authorities face legal challenges in the absence of clear legislation with respect to access to digital platforms and gadgets such as laptops, emails, and hard disks.

The new bill defines the special powers granted to investigative authorities to access the digital data and accounts of taxpayers. If taxpayers deny them access, the authorities can override the system,