Finance Minister Nirmala Sitharaman, speaking in the Lok Sabha on March 25, 2025, addressed privacy concerns over a provision in the new Income Tax Bill that allows authorized officers access to digital data. She explained why it is important to allow access to digital data, like mobile phone messages, during tax investigations.
She said that the current law allows officers to check physical records like ledgers and account books during search and seizure. But it doesn’t clearly mention digital records. This has caused confusion in some cases, where people refused to share mobile access codes.
To fix this gap, she said, “It is now being specifically brought in and mentioned in the new bill… The 1961 Act does not mention the digital… so in order that what prevails now with a gap, that gap is getting filled up.”
She gave several real examples where digital data helped uncover large tax frauds. “Encrypted messages and mobile phones, unaccounted money to the extent of Rs. 250 crores have been detected when the encryption has been decoded.”
In one case, she said, “WhatsApp Communications and incriminating materials found from such conversations helped to unearth the syndicate and identify the end beneficiaries of bogus bills worth Rs. 200 crores.”
She said that even crypto assets worth over Rs. 90 crore were discovered through WhatsApp chats. In another case, people reduced capital gains from Rs. 150 crore to just Rs. 2 crore by using fake documents and false claims in bank statements. The WhatsApp group involved also had professionals.
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She added, “Google map history… enabled detection of hideouts where cash and unaccounted transactions are kept.”
Instagram was also used in a case to find out who owned expensive vehicles linked to benami property.
“If the law does not give you the legal backing… in spite of the fact and evidence being in your face… it becomes tedious,” she said. “Therefore, the digital element has to be brought in.”
The new Income Tax Bill is currently being reviewed by a select committee.
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