Categories: Direct Tax

Tax Dept allows to access digital platforms in investigation

Tax Dept allows to access various digital platforms during investigations

The proposed Income Tax Bill, 2025, introduces significant changes aimed at enhancing the Income Tax Department’s ability to address tax evasion in the digital age. These changes are primarily encapsulated in the expanded definition of “virtual digital space” and the corresponding enforcement powers granted to tax authorities

Proposed Amendments for 2026 : There is no official notification or amendment granting direct access to individuals’ social media, emails, or personal digital data. However, the government is strengthening compliance and monitoring through initiatives like:

    • Increased reporting by banks and financial institutions.
    • Form 26AS & AIS to track transactions.
    • Enhanced scrutiny of social media lifestyle indicators to flag mismatches in declared income vs. actual spending.
    • Other countries like the USA (IRS), UK (HMRC), and Australia (ATO) also use advanced data mining and third-party reporting rather than direct hacking into private accounts.

CBDT Going to Enhanced Enforcement Tax officers Powers:

While the government justifies this move as essential to combat evolving tax evasion techniques, its constitutional validity, enforcement mechanisms, and privacy safeguards are expected to be debated before implementation. To effectively utilize this expanded definition, the bill grants authorized officers the power to Break open the lock of any door, box, locker, safe, almirah, or other receptacle or gain access by overriding the access code to any said computer system, or virtual digital space, where the access code thereof is not available. This means that if an individual under investigation does not provide access credentials to their digital platforms, tax authorities are legally empowered to bypass security measures to access these platforms. The bill extends search and seizure powers to include emails, social media accounts, cloud storage, and online financial accounts, marking a significant departure from the previous framework that restricted authorities to physical assets like lockers and safes.

  • Implications for Employers: Given the broad definition of “virtual digital space,” there is a concern that tax authorities could potentially access sensitive company data associated with an employee under investigation. This raises significant issues regarding data protection and privacy, especially in the absence of clear guidelines or safeguards within the bill.
  • Potential Privacy Violations: Unrestricted access to personal digital platforms could lead to potential infringements on individual privacy. The bill raises constitutional concerns regarding the right to privacy (Article 21), as recognized by the Supreme Court.
  • Corporate Data Risks and Security: Overriding security measures may expose sensitive information, increasing the risk of data breaches. The bill’s broad definition of VDS could lead to access to company servers and confidential employer data, creating data protection concerns.
  • Legal Challenges & Safeguards Oversight: The absence of judicial oversight in granting such powers could result in misuse or overreach by authorities. Currently, the bill lacks clear safeguards to prevent potential misuse or unauthorized access by tax officials.
  • Other Implications: While these measures aim to strengthen the detection and prevention of tax evasion, they also raise concerns regarding:
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