New Income Tax Bill Will Not Violate Online Privacy of Common Taxpayers

Government Introduces New Bill to Modernize Decades-Old Taxation Laws

The Indian government is set to introduce the Income-Tax Bill, 2025, in Parliament on February 13 as part of a broader effort to revamp the country’s direct tax framework. This bill seeks to replace the Income Tax Act of 1961, a long-standing statute that has governed the taxation system for over six decades.

According to senior officials from the Income Tax (I-T) department, the new law is not designed to infringe upon the online privacy of common taxpayers, even in cases where their returns come under scrutiny. Instead, the bill retains existing provisions that empower tax authorities to access digital systems only during search and survey operations.

No New Powers to Breach Digital Privacy, Says Official

Addressing concerns over the bill, a senior I-T department official clarified that the powers to override access codes and gain entry into digital storage systems are not new but are already present in the Income Tax Act of 1961.

“Such reports are nothing but fear-mongering. The tax department is not into snooping on social media accounts or online activities of taxpayers,” the official told PTI.

The official further stated that digital access permissions outlined in the new bill are applicable only in specific cases where an assessee refuses to cooperate during a search or survey. The Income-Tax Bill, 2025, reiterates existing provisions, ensuring that tax authorities can access digital evidence only when necessary to prevent tax evasion.

Section 247: Addressing the Digital Age Challenges in Tax Evasion

One of the key highlights of the new tax bill is Section 247, which provides tax officials with authority to override access codes of computer systems and virtual digital spaces. However, this power is limited to cases of search and seizure and cannot be used arbitrarily.

The bill aligns with Section 132 of the current law, which allows officials to demand access to electronic records for inspection and seizure. The increasing complexity of tax crimes in the digital era has necessitated these measures, officials say.

“Tax evasion has evolved significantly with the rise of smart internet-based tools and technology. Digital access during search and survey operations is critical in uncovering tax fraud,” a second official explained.

Search and Survey Operations Target Only a Select Few

A widespread concern among taxpayers is whether these provisions will lead to unnecessary intrusion into their private digital space. However, officials have emphasized that only a small fraction of taxpayers ever come under investigation.

• Out of approximately 8.79 crore income-tax returns (ITRs) filed annually, only 1% are selected for scrutiny.
• The tax department conducts only about 100-150 full-scale searches and surveys per financial year, meaning that common taxpayers are rarely affected by these operations.

“The provisions related to virtual digital space do not apply to routine scrutiny cases. They come into play only during searches and surveys, which are conducted in select, high-risk cases,” the official clarified.

Digital Evidence Key to Proving Tax Evasion in Court

The I-T department has also highlighted the growing importance of digital evidence in legal proceedings related to tax fraud. Authorities have encountered several cases where individuals or businesses refuse to share access codes to their digital storage, making it difficult to gather proof of wrongdoing.

With modern financial transactions and records increasingly stored on Cloud servers and digital platforms, accessing such data becomes essential to determine the exact amount of tax evaded.

“In some instances, key financial records are stored on servers abroad, beyond India’s jurisdiction. If a person refuses to provide access codes, the investigation becomes ineffective, allowing tax evaders to escape scrutiny,” a tax official explained.

The introduction of the Income-Tax Bill, 2025, comes at a time when global economies are tightening regulations around digital financial transactions and tax compliance. While concerns regarding privacy and digital rights remain, government officials have reassured that the provisions of the bill are designed only to ensure tax compliance and not to infringe upon individual privacy.