The Union Finance Minister Nirmala Sitharaman tabled the New Income Tax Bill, 2025 in the Lok Sabha yesterday, 13 February, 2025. A controversial revision of powers vested on tax officers, granting them extensive powers has been at the centre of discussion since the presentation in the Parliament.
While the proposed bill has been hailed by many as a saving grace, streamlining tax administration, it has simultaneously drawn up criticism regarding taxpayer privacy and data security. Under the new bill, income tax officers conducting search and seizure operations are vested upon the power to demand “necessary technical assistance, including access codes” to inspect digital records, books of accounts, and computer systems.
Read More: Broad Scope of New Income Tax Bill 2025: General FAQs Answered
The provision explicitly includes Virtual Digital Spaces and Virtual Digital Assets (VDA), effectively extending its arms to online trading accounts, cloud storage and cryptocurrency wallets. Furthermore, tax officers have been empowered by Clause 247 of the proposed bill to not only enter business premises but also demand access to sensitive digital systems, including cloud storage, online trading accounts, and email servers.
Officers shall be able to demand technical assistance from individuals or employees present at the site and even override access codes to computer systems and VDAs if they are not provided voluntarily.
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Furthermore, Clause 524 states that any undisclosed virtual digital asset found in the possession of any person may be presumed to be owned by the person undergoing search and seizure for the purposes of assessment and tax proceedings.
Read More: Inspection, Search, and Seizure under GST: Who Can Conduct It and Why?
The concerns come amid ongoing discussions regarding the Bill’s intent to increase the independence of the Central Board of Direct Taxes (CBDT) in various administrative aspects. Valid concerns contend that the grant of excessive discretionary power to tax authorities shall result in a direct attack on taxpayers’ privacy rights.
While one can hope that the proposed amendments have been crafted in the best interests of the nation, a lack of clear oversight and redressal mechanisms raises fears of abuse of power, primarily concerning personal and sensitive financial data.
Read More: List of Sections in the New proposed Income Tax Act, 2025
The broad provisions regarding digital access codes and VDAs while touted to prevent unscrupulous holding of assets, also blurs the line between the powers exercisable by the Government and the Governed citizens in a democracy such as India.
While discussions on the Income Tax Bill 2025 are still underway, further clarifications are expected in the coming weeks, possibly shedding more light on the issue.
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