Budget 2026: ICAI warns new Income Tax Act gives tax officials sweeping access to personal digital data

As the Union Budget 2026–27 approaches, India’s apex accounting body has raised concerns that could unsettle taxpayers in an increasingly digital economy. The Institute of Chartered Accountants of India (ICAI) has cautioned that provisions in the new Income Tax Act, 2025, grant tax authorities expansive powers to access personal digital data during search and seizure operations, potentially infringing on the fundamental right to privacy. The institute has urged the government to urgently address what it describes as a significant legislative gap.

In its pre-Budget memorandum to the finance ministry, ICAI has flagged Section 247 of the Income Tax Act, 2025. According to the institute, the provision, as currently worded, allows excessive access to electronic communications and personal data, going beyond what is necessary for tax enforcement. ICAI has recommended that the law be amended to restrict such access to official email accounts of the person concerned, rather than permitting blanket inspection of all digital communications.

Section 247

Section 247 empowers authorised officers — including Income Tax Officers, Assistant Directors and Assistant Commissioners — to conduct search and seizure operations if they have “reason to believe” that a person possesses undisclosed income, assets, books of account or relevant information. Crucially, the provision explicitly extends these powers into the digital domain. It permits officials to inspect any “information, electronic record or communication” available on computer systems, covering emails, cloud-stored data, device contents and even social media activity.

During a search, officers may enter and search premises, vehicles or aircraft, demand access to electronic records, seek technical assistance such as passwords or access codes, override system protections if required, copy or extract digital data, and seize documents, devices or assets other than business stock-in-trade.

Search and seizure powers

ICAI has acknowledged that search and seizure powers are an essential tool to combat tax evasion, but has argued that Section 247 goes too far in its present form. The institute warned that allowing unrestricted inspection of emails, social media and other digital communications amounts to potential digital surveillance. Such sweeping powers, it said, could be misused and may not withstand constitutional scrutiny.

To balance enforcement with privacy, ICAI has proposed a targeted safeguard: amending Section 247(1) to confine access strictly to official email accounts. This, it believes, would protect personal digital spaces while still enabling authorities to gather relevant evidence.

Search and seizure actions are typically undertaken only in serious cases where authorities have credible information about undisclosed income or assets, or when taxpayers fail to respond to notices or produce required documents. However, with personal and professional lives increasingly intertwined across digital platforms, the scope of permissible access has become a growing concern.

The government and the Central Board of Direct Taxes (CBDT) have repeatedly stressed that such powers are not meant for routine surveillance. They argue that searches require due authorisation, are governed by strict procedures and are used sparingly in cases of serious tax evasion. Yet ICAI’s concern centres on the law’s wording rather than official intent.