Income Tax Bill 2025: Enhanced Search Powers Now Raise Privacy Concerns

Recognizing digital data as evidence under the Income Tax Act could be challenging

- Dharmesh Shah

On 13 February, Union Finance Minister Nirmala Sitharaman introduced the much-awaited Income Tax Bill, set to replace the Income-Tax Act, 1961. A key change in the Income-Tax Bill, 2025, is the expanded power given to tax authorities to conduct searches on tax evaders.

The bill introduces the term ‘virtual digital space’ in search and seizure provisions. It broadly includes email servers, social media accounts, online investment and trading accounts, banking accounts, websites storing asset ownership details, remote or cloud servers, and digital application platforms.

While digital platforms enable secure financial communication and storage, they are also used for income concealment and money laundering. The definition of virtual digital space gives authorities broad access to these platforms for tax investigations.

Although the central 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.