What rights do taxpayers have if I-T dept scans social media, email, trading, bank accounts under the Income-tax Bill 2025?

Effective April 1, 2026, tax officials will be granted the power to review emails, social media activity, bank records, and online investments in cases where tax evasion or undisclosed income is suspected. 

However, taxpayers should be aware that tax officials are not authorised to arbitrarily select individuals for scrutiny of their online accounts. The new bill introduces specific conditions that must be met before income tax officials are permitted to access a taxpayer's personal online accounts.

How much tax do I have to pay? Calculate now

Here's what the proposed bill say:

The new Income Tax Bill introduces provision for "virtual digital spaces" and grants officials the right to scrutinize emails, social media, cloud storage, and online financial accounts in instances of suspected tax evasion. 

The aim of the bill is to combat modern tax evasion practices, but it has sparked discussions on the balance between enforcement and privacy. This expanded enforcement power is outlined in Section 247 of the Income Tax Bill, 2025, in alignment with the existing Section 132 of the Income Tax Act, 1961, albeit with a wider scope.

Is this a new provision?

The proposed changes in the new income tax bill do not introduce any new measures, but rather clarify the existing regulations surrounding search and seizure. The current law allows tax officials to examine electronic records during search and seizures, enabling them to access virtual spaces if there are suspicions of undisclosed income.
Besides under the current rules, income tax officers were only allowed to access physical areas, like lockers or safes, when keys or access were not provided.

Under the current law, individuals have the right to challenge the tax department in court if they feel that their personal digital space has been violated during a search and seizure, such as checking emails or social media accounts. To avoid future legal issues, the new bill explicitly includes provisions relating to virtual digital space.

Additionally, the new bill aims to ensure that undisclosed income from virtual digital assets like cryptocurrencies is not overlooked during search and seizure operations.

Definition of virtual digital space

As per the proposed legislation, the definition of virtual digital space refers to "an environment, area, or realm created and interacted with via computer technology." This encompasses the following components:

Email servers
Social media accounts
Online investment accounts
Trading accounts, banking accounts, etc.
Websites utilized for storing ownership details of assets
Remote servers or cloud servers
Digital application platforms
Any other similar virtual space

How the bill empowers I-T department?

The proposed Bill says, tax officials can "break open the lock of any door, box, locker, safe, almirah, or other receptacle for exercising the powers conferred by clause (i), to enter and search any building, place, etc., where the keys thereof or the access to such building, place, etc., is not available, 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."

When I-T dept can access your virtual space

Under the proposed bill, tax officials have the authority to request access to your virtual digital spaces if they suspect you are concealing undisclosed income intentionally. If you do not cooperate with their investigation, they may resort to accessing your digital spaces by force.

However, these drastic measures will only be taken after the income-tax department has already sent a summons or notice to the taxpayer, who has not responded adequately.

Who is permitted to access your personal online accounts?

According to the legislation, the virtual digital presence of a taxpayer suspected of concealing unreported earnings may be inspected by a joint director, joint commissioner, assistant director, assistant commissioner, or income-tax officer authorized by the income-tax department.

The authorized joint director or joint commissioner has the authority to delegate any assistant director, assistant commissioner, or income-tax officer to carry out such search and confiscation.

What rights do taxpayers have in such cases

Dr. Suresh Surana, CA, told Business Today that taxpayers are entitled to certain legal rights when it comes to the government's access to digital financial records and virtual space, as outlined in the Income Tax Bill, 2025. He emphasized that these rights include the right to privacy, due process, and fair investigation.

Right to privacy: Specifically, taxpayers have the right to privacy and protection against unlawful access to their digital information. This fundamental right is enshrined in Article 21 of the Constitution of India and must be upheld by tax authorities. Any access to personal data, whether through social media, emails, or digital assets, must comply with strict data protection laws outlined in the Information Technology Act, 2000. Actions taken by authorities must be in accordance with constitutional safeguards and cannot be arbitrary or excessive.

Right to Due Process & Fair Investigation: Tax authorities must adhere to proper legal procedures and obtain necessary authorizations before conducting searches or seizures. If a taxpayer is accused of evasion, they are entitled to a fair hearing and the opportunity to present their case before any penalties or prosecutions are enforced.

The implementation of the new income tax is scheduled to start on April 1, 2026. Approval from the Parliament for its provisions is still pending.