New I-T Bill grants legal authority for tax officials to access your digital space

Under the proposed Income Tax Bill effective from 1 April 2026, the income tax department will gain legal authority to access your social media accounts, personal emails, bank accounts, online investment accounts, and trading accounts if they suspect tax evasion or the existence of undisclosed income, assets, or valuables — such as money, gold, jewellery, or property — on which you have not paid relevant income tax under the Income Tax Act 1961.

Section 132 of the current Income Tax Act allows authorised officers to conduct searches and seize assets if they have credible information suggesting an individual is concealing income or property to evade taxes. Previously, officials could only break open doors, safes, or lockers if they suspected undeclared assets were hidden there. From 1 April 2026, this authority will extend to the digital realm, enabling access to computer systems and online accounts if officials suspect tax evasion information is being concealed.

On 13 February, Union finance minister Nirmala Sitharaman introduced the long-awaited Bill to replace the existing I-T Act. Among the proposed changes, a significant one is the extensive power granted to tax authorities to conduct searches of suspected tax evaders. The Bill introduces the term "virtual digital space" in relation to search and seizure actions, defining it broadly to include email servers and social media.

Currently, officers can break open doors, boxes, or lockers if they lack keys and believe undisclosed assets are stored there. The new Bill expands this power to include access to computer systems and virtual digital spaces.

According to clause 247 of the draft Bill, if an authorised officer suspects an individual has undisclosed income or property, they can "break open the lock of any door, box, locker, safe, almirah, or other receptacle... to enter and search any building or place where keys or access are unavailable, or gain access by overriding the access code to any computer system or virtual digital space where the access code is not available".

This means that authorised officers could potentially access your computer systems, emails, or social media accounts if they suspect deliberate tax evasion.

What changes does the new Bill introduce?

The Bill provides a broad definition of virtual digital space, encompassing social media accounts, bank accounts, trading and investment accounts, and emails, an “environment, area, or realm created and experienced through computer technology, distinct from the physical world”.

This includes any digital space that enables interaction, communication, and activities using computer systems and networks, such as cyberspace, the internet, and emerging technologies. Specifically, this definition includes: (i) email servers (ii) social media accounts (iii) online investment, trading, and banking accounts (iv) any website storing asset ownership details (v) remote or cloud servers (vi) digital application platforms (vii) any other similar space.

Who qualifies as an authorised officer?

The Bill defines “authorised officer” to include: (i) joint director or additional director (ii) joint commissioner or additional commissioner (iii) assistant director or deputy director (iv) assistant commissioner or deputy commissioner (v) income tax officer or tax recovery officer

However, this expansion of authority raises concerns regarding the Right to Privacy. The Supreme Court observed in Justice K.S. Puttaswamy v. Union of India (2017) that the Right to Privacy under Article 21 of the Constitution is fundamental, and that any state intrusion must satisfy the tests of legality, necessity, and proportionality.