New Income-Tax Bill Empowers Officials to Access Emails, WhatsApp Chats for Crypto Tax Evasion Investigations

Government Cracks Down on Undisclosed Cryptocurrency Holdings with Expanded Digital Oversight

The Income-Tax Bill, 2025, introduced in Parliament, seeks to modernize tax enforcement by granting officials access to electronic records, including emails, WhatsApp chats, and Telegram messages, if they suspect a person has concealed taxable income—particularly undisclosed cryptocurrency holdings.

This landmark proposal aims to plug loopholes in the digital economy, ensuring that virtual assets such as cryptocurrencies do not escape tax scrutiny. The bill extends search and seizure provisions of the existing Income-Tax Act, 1961, bringing digital transactions and communications under the tax net.

Expanded Digital Surveillance: A Major Shift in Tax Enforcement

The bill allows tax officers above the rank of joint commissioner to:

• Override access controls on electronic devices and cloud storage
• Monitor encrypted communication platforms, including WhatsApp, Telegram, and emails
• Seize digital asset records from cryptocurrency exchanges, wallets, and servers
• Investigate blockchain transactions linked to tax evasion

This move aligns with the government’s goal of preventing tax evaders from exploiting digital platforms to conceal assets. With crypto trading surging in India, authorities are determined to ensure that profits generated from virtual digital assets are duly taxed.

“These powers are not new but a reiteration of existing provisions in a clearer form. The law already permits tax officials to inspect electronic records during search and seizure actions. The new bill extends this to virtual digital spaces to ensure undisclosed cryptocurrency holdings are not overlooked,” said chartered accountant Hemant R.

Crackdown on Undisclosed Crypto Holdings: Strengthening Digital Tax Compliance

Currently, cryptocurrency gains in India are taxed at a flat 30% rate, with a 1% Tax Deducted at Source (TDS) on transactions. However, many individuals and businesses attempt to avoid taxation by concealing crypto assets through anonymous wallets, offshore accounts, and encrypted messaging services.

The Income-Tax Bill, 2025, proposes to bridge this gap by bringing virtual transactions under the tax enforcement radar.

“This bill aligns taxation powers with technological advancements, ensuring that digital assets such as cryptocurrencies do not escape scrutiny,” noted tax expert Ajay Rotti.

At present, Section 132 of the Income-Tax Act allows tax officials to inspect and seize electronic records. The new bill builds upon this by explicitly extending these powers to virtual digital spaces, ensuring undisclosed crypto holdings are thoroughly examined.

How the New Bill Strengthens Search & Seizure Operations

The bill introduces Section 247, which explicitly authorizes tax officials to:

• Gain access to digital assets by overriding access codes on computer systems, cloud storage, and virtual wallets
• Inspect financial transactions linked to crypto trading on decentralized platforms
• Collect evidence stored on Software as a Service (SaaS) clouds, Enterprise Resource Planning (ERP) systems, and remote servers
• Scrutinize conversations on encrypted apps such as WhatsApp, Signal, and Telegram to identify tax evasion tactics

These enhanced search and seizure provisions will allow officials to uncover hidden assets, making it harder for tax evaders to exploit blockchain anonymity.

Crypto Boom in India: Rising Scrutiny on Digital Asset Trading

India’s cryptocurrency market has witnessed exponential growth, attracting millions of investors across metro cities and smaller towns. According to a Reuters report, trading volumes of Bitcoin, Ethereum, Dogecoin, and other digital currencies doubled quarter-on-quarter, reaching $1.9 billion in the December quarter.

The Indian crypto market is projected to grow from $2.5 billion in 2024 to over $15 billion by 2035, underscoring the government’s urgency to regulate and tax the industry effectively.

With blockchain transactions offering a degree of anonymity, many individuals attempt to bypass tax obligations by routing funds through decentralized platforms and offshore exchanges. The proposed bill seeks to curb such practices by introducing robust enforcement measures.

Industry Reactions: Experts Weigh in on the New Bill

While the bill aims to enhance tax compliance, it has sparked debates within the cryptocurrency industry. Some experts argue that the government’s ability to override access controls on digital devices could raise privacy concerns.

“Tax enforcement is necessary, but the broad powers given to tax officials must be exercised judiciously. A balanced approach is needed to prevent undue privacy violations,” said a cybersecurity expert.

However, supporters of the bill argue that stronger oversight is essential to curb tax evasion in the rapidly growing crypto market.

“Cryptocurrency is no longer an underground asset class. With massive adoption in India, the government must ensure that tax revenues from digital assets are properly collected,” said an industry analyst.

What’s Next? Bill Under Parliamentary Review

The Income-Tax Bill, 2025, is currently under parliamentary review. A select committee is engaging with stakeholders, including tax experts, cryptocurrency exchanges, and financial analysts, to refine the provisions before the bill is finalized.

If passed, the law will significantly change how digital transactions are monitored in India, making it more difficult for individuals and businesses to hide cryptocurrency holdings.

Conclusion: A New Era of Digital Tax Enforcement

With the rise of cryptocurrency trading and blockchain-based financial activities, governments worldwide are grappling with the challenge of taxing digital assets effectively. India’s proposed Income-Tax Bill signals a decisive step towards closing tax loopholes in the digital economy.

By expanding search and seizure powers to electronic records and encrypted platforms, the bill aims to enhance compliance, boost tax revenues, and prevent tax evasion in the fast-evolving virtual asset ecosystem.

As the crypto market continues to expand, the government’s regulatory approach will shape the future of digital asset taxation in India—potentially setting a precedent for other nations to follow.