The Income Tax department will soon have the legal authority to access social media accounts, personal emails, bank accounts, online investment accounts, trading accounts, and other virtual digital assets in cases of suspected tax evasion.
New provisions in the proposed Income Tax Bill, set to take effect next year, will empower tax officials to break into computer systems and digital devices to probe undisclosed income, money, gold, jewelry, valuable items, property, and digital assets.
“The new Income Tax clause 247 aligns with the rapid digitization of financial transactions and online payment gateways used by businesses. The amendments will grant legal powers to tax officers to investigate digital devices and online financial records for improved tax compliance,” confirmed a senior tax official.
The bill introduces the term ‘virtual digital space’ in the provisions related to search and seizure operations. This includes email servers, social media accounts, online investment accounts, trading accounts, banking accounts, websites storing asset ownership details, remote servers or cloud servers, and digital application platforms.
Previously, tax authorities had the power to break open doors, safes, or lockers if they suspected undeclared assets, books of accounts, or financial records. However, starting in April 2026, these rights will extend to digital devices and online accounts to prevent financial fraud and tax evasion. The amendments mandate that individuals under investigation must share ‘access codes’ of virtual digital spaces with tax officials during search and seizure operations.
“Digital forensics will play a major role in detecting tax fraud, and the new law grants tax authorities legal powers to investigate undisclosed financial information,” explained chartered accountant Deepak Jain.
The proposed Income Tax Bill will empower authorized officers who suspect an individual possesses undisclosed income or property to:
Break open the lock of any door, box, locker, safe, almirah, or other receptacle for investigation.
Gain access by overriding the access code to any computer system or virtual digital space if the code is unavailable.
These powers will extend to monitoring social media accounts, emails, digital footprints, and online financial records to curb rising financial fraud and tax evasion.
While some tax consultants have raised privacy concerns, citing the potential for abuse and misuse of data, the Union Finance Ministry has assured that adequate safeguards will be in place to protect taxpayers' data privacy.
