New Income Tax Bill: Can I-T Department Snoop On You? Digital Access Limited To Search Operations

The new Income Tax bill grants Income Tax Department an explicit legal authority under the amended provisions of Section 132 of the Income Tax Act to use advanced digital tools and engage forensic experts during search operations.

The revised Section 132 specifies that income tax authorities can access a broad range of digital records — including emails, social media accounts, cloud storage and other electronically stored information — strictly during authorised search and seizure operations. This marks a shift from earlier versions of the Income-tax Act, 1961, which did not contain explicit provisions on digital access as such platforms were either non-existent or not widely used at the time.

The amended provision includes the power to override passwords, encryption mechanisms and digital access keys when an assessee refuses to provide access credentials. This is aimed at addressing the increasing use of technology in financial transactions and the concealment of assets through digital means.

One of the key applications of this provision is in accessing digital wallets and virtual digital asset accounts, including cryptocurrencies and other blockchain-based holdings. By enabling authorised officials to bypass user-imposed restrictions on access, the department is now equipped to identify, trace and seize unreported or undisclosed digital assets during investigations.

In response to public concern over the scope of these powers, the Chairman of the Central Board of Direct Taxes said in a print interview, “This is strictly restricted to search and seizure operations where taxpayers refuse to share information, and are not aimed at snooping on ordinary taxpayers.”

The statement was intended to reassure taxpayers that these powers are not meant to intrude on the privacy of compliant individuals but to target deliberate non-compliance and concealment.

The new provisions, introduced through the latest amendment Bill, were passed in the Lok Sabha on Monday. They align enforcement mechanisms with the realities of the digital economy, provide greater legal clarity and enhance the department’s operational effectiveness in detecting and addressing tax evasion involving digital platforms.