The New Income Tax Bill 2025 was tabled in the Lok Sabha by Union Finance Minister Nirmala Sitharaman on 13 February, 2025 after widespread hue and cry from opposing factions against many of the proposals laid down by the new bill.
One of the less-discussed, but highly critical elements of the new Bill is its provision of increased powers to the Central Board of Direct Taxes (CBDT), specifically with regards to the powers exercisable while dealing with Virtual Digital Spaces (VDS).
Clause 261(i) of the Income Tax Bill 2025 explicitly defines “Virtual Digital Spaces” to include email servers, social media accounts, online investment accounts, digital application platforms, cloud servers, and even websites used for storing asset ownership details.
Clause 253 empowers an income-tax authority to enter any place conducting business or profession or charitable purpose and require the individuals associated with the concern to enable inspection of relevant books of accounts, documents or computer systems including Virtual Digital Spaces as and when called for.
Read More: Lok Sabha Speaker Forms Select Committee to Review Income Tax Bill, 2025
The provision has very slyly and subtly overarched its powers to sanction the search and inspection of social media accounts of suspected entities, clearly overstepping the bounds of income tax and making inroads into issues of right to privacy, discretionary powers and politically-charged abuse of power.
The Income Tax Bill, 2025 has, through Clause 524 very subtly extended its arms to include the “presumption of authority” to presume that the materials uncovered during search and seizure, to conclusively belong to the searched entity, permitting the same to be deemed ‘true’ for the purposes of tax assessment and penal liabilities.
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If by any foreign logic the same intent is applied to material uncovered from the Social Media Accounts of searched individuals, it could result in a tax enforcement mechanism expanding into the personal lives of people using state power.
While the careful wording of the Income Tax Bill, 2025 maintains the jurisdiction of powers to be exercised exclusively with regard to issues surrounding tax compliance, a lack of an established mechanism to invoke the powers therein could prove fatal for the interplay between state power, citizens rights and digital ethics.
Out of the million ways this could go wrong, some of the most plausible manners include:
Targeting of Political Opponents and Critics – With access to social media, authorities could monitor dissenting voices and use tax scrutiny as a weapon against activists, journalists, and opposition leaders.
Deter Free Speech – Knowing that financial authorities can track and analyze social media activities may cause citizens to self-censor out of fear of potential repercussions.
Create a “Big Brother” Tax Regime – The lack of actual clarity in the proposed legislation leaves the door open for unilateral scrutiny over the digital lives of individuals, regardless of any concrete suspicion of tax evasion.
Increase Harassment of Individuals and Businesses – Even legitimate businesses and individuals could be subjected to arbitrary tax probes simply based on their digital activity, leading to increased compliance burdens.
Read More: Income Tax Department Releases Utility to Compare Old vs New Income Tax Act Sections
Another key facet introduced by the Income Tax Bill 2025 is the complete lack of need for taxpayers to appear in person for adjudication and ability of the authorities to create a perpetual surveillance mechanism tying together intelligence agencies and tax authorities.
While one could argue that the expanded powers proposed to be vested on the CBDT are in line with global best practices to avert any and all forms of tax evasion and promote good governance, but, such a system can be said to be utilitarian only if it employs a robust system of accountability. Unlike financial audits or criminal investigations, where judicial approval is required for invasive measures, these new provisions appear open-ended and self-regulated by CBDT itself.
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Clause 249 of the Bill permits tax officers to conduct the process of search and seizure without having to prove the reasons so recorded for the same before any person or authority or even the Appellate Tribunal.
Shockingly, the provision has failed to answer the questions of Who determines the necessity of surveillance, What safeguards exist against misuse and What recourse does a citizen have if wrongly targeted.
Read More: Income Tax Bill 2025: 30% Tax on Transfer of Cryptoassets and NFTs
With social media playing a bigger role than ever in steering political discourse and ideology, every opinion in this age gains prominence only if it is ‘viral’ enough. The fabric of Indian democracy was founded on the forefathers ability to question and dissent; while social media is a crucial tool for activism, independent journalism, and political critique, giving tax authorities free rein over social media accounts could indirectly stifle dissent.
Any law should have in place a requisite mechanism for judicial or parliamentary oversight, the lack of which shall be a slippery slope towards authoritarianism. Borrowing tenets from major law systems around the world, an equitable mechanism should require Judicial approval before accessing private digital spaces.
Want a deeper insight into the Income Tax Bill, 2025? Click here
Furthermore, the establishment of a citizen oversight committee shall work wonders when digital surveillance is used in tax matters and a defined system of appeal should exist to discourage aggressive tax probes initiated by the authorities subverting other fundamental provisions of law.
While the Income Tax Bill, 2025 has been tabled at the Parliament for the first round of discussions, the same is still awaiting further discussions and final assent before it comes into force. Let us wait and watch what developments or safeguarding measures shall be introduced to avert wanton governmental overreach into matters of privacy and self-liberty.
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