Tax Dept investigation Access Virtual Digital Space platform

Senior tax officials can access various digital platforms during investigations into suspected tax evasion

The Income Tax Bill, 2025, proposes significant changes that expand the scope of tax investigations to include digital assets and virtual spaces starting from April 1, 2026. Starting April 1, 2026, India’s Income Tax Department will have expanded powers under the new Income Tax Bill, 2025, allowing authorized officers to access various digital platforms during investigations into suspected tax evasion or undisclosed assets. These platforms include personal emails, social media accounts, bank accounts, online investment accounts, trading accounts, and other virtual digital spaces.

This proposal is still under review in Parliament, and amendments may be made before it is enacted in FY 2026-27. Further clarifications and potential amendments may address these concerns before its implementation in 2026. However, it marks a major shift in tax enforcement, bringing digital assets and online activity under direct scrutiny. Here’s a breakdown of the key aspects:

1. Expanded powers for income tax officials:

Under Clause 247 of the Income Tax Bill, 2025, tax officials will have the authority to:

• • Physically break open doors, lockers, safes, and other storage units if access is denied.
  • Bypass digital security measures to access computer systems and virtual digital spaces, including email servers, social media accounts, bank accounts, and online investment platforms.
  • This extends the current powers under Section 132 of the Income Tax Act, 1961, which allows the seizure of assets and books during search operations when undisclosed income or assets are suspected.

2. Definition of Virtual Digital Space:

The bill introduces ‘Virtual Digital Space’ (VDS), which includes:

• • Email servers
  • Social media accounts
  • Online investment accounts, trading accounts, and bank accounts
  • Websites storing ownership details of assets
  • Remote or cloud servers
  • Digital application platforms
  • Any other similar digital storage or transaction space

3. Who Has Tax Authority?

The powers to access and investigate digital assets will be granted to senior tax officials, including:

• • Joint Directors, Additional Directors
  • Joint Commissioners, Additional Commissioners
  • Assistant or Deputy Directors
  • Assistant or Deputy Commissioners
  • Income Tax Officers
  • Tax Recovery Officers

4. Implications for Taxpayers:

This development represents a significant shift from the current Income Tax Act, 1961, which does not explicitly cover such digital domains. The new bill defines ‘virtual digital space’ broadly, encompassing email servers, social media accounts, online investment accounts, trading accounts, banking accounts, websites storing asset ownership details, remote or cloud servers, digital application platforms, and similar spaces.

Individuals and businesses suspected of tax evasion will be subject to deeper digital investigations. Since the bill allows access to personal and financial data, it raises concerns about privacy rights and data protection. Taxpayers will need to ensure proper documentation and tax payments to avoid potential searches and digital investigations. Legal experts emphasize the need for clear safeguards to balance effective tax investigations with the protection of individual digital rights and privacy.

While these measures aim to enhance the detection and prevention of tax evasion, they have raised concerns regarding taxpayer privacy and potential overreach.

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