Income Tax Bill 2025: A Threat to Digital Privacy?

The recently proposed Income Tax Bill 2025 has prompted heated controversy, particularly over its provisions for search and seizure. While tax authorities claim that the bill simply streamlines existing laws, a key addition has raised concerns among digital rights activists and tax experts alike: tax officials’ explicit authority to override access controls such as passwords and encryption mechanisms used for digital communication. This discovery has paved the way for a broader debate about the balance between tax enforcement and digital privacy.

The New Power to Override Digital Access

The bill expands upon existing search and seizure powers granted under the Income Tax Act, 1961. While officials have long held the authority to seize physical and digital records, the new proposal explicitly grants them the ability to bypass access restrictions on digital devices and online platforms. This includes accessing a wide range of “virtual digital spaces,” such as email accounts, social media platforms, online banking and investment accounts, and even cloud storage. If passed, the bill could empower tax officials to employ password-cracking tools or request technology companies to bypass encryption, potentially compelling firms like Apple and Google to aid in government investigations.

Tax authorities have defended the proposal by arguing that it merely codifies existing practices. Officials claim that they already collect digital evidence during tax investigations and that the change simply clarifies their authority. However, critics contend that formalizing such broad powers without robust safeguards opens the door to potential overreach and misuse. It is to be noted that while the 1961 Act allowed for data collection, it did not explicitly permit authorities to override access controls—a distinction that could have serious implications for digital privacy.

Privacy Concerns and Legal Loopholes

One of the most contentious aspects of the bill is its potential conflict with privacy laws, particularly the Digital Personal Data Protection Act (DPDP). Although the DPDP has yet to be fully implemented, it was designed to impose restrictions on government surveillance. However, legal experts believe that tax authorities would likely be exempt from the DPDP’s scope, just as other government agencies have been granted broad exemptions. This raises concerns that the new powers could enable unchecked surveillance without adequate oversight.

The Internet Freedom Foundation (IFF), a leading digital rights organization, has written to the Select Committee of Parliament urging lawmakers to incorporate constitutional safeguards into the bill. The foundation has called for the inclusion of a “proportionality standard,” as established in the Supreme Court’s landmark 2017 right-to-privacy judgment. According to IFF, tax authorities should be required to use “the least invasive methods” when conducting digital searches, to prevent unnecessary intrusion into personal data. Without such safeguards, the bill risks granting excessive enforcement powers that could lead to taxpayer harassment and the erosion of fundamental privacy rights.

Striking a Balance Between Tax Enforcement and Privacy

The government’s argument for the new provisions is rooted in its ongoing crackdown on tax evasion. Officials argue that digital communications and encrypted transactions have made it easier for individuals and corporations to conceal taxable income. The ability to override access controls, they claim, is crucial in ensuring tax compliance and identifying financial fraud. Indeed, the government has significantly expanded its digital oversight capabilities in recent years, implementing measures such as the Goods and Services Tax (GST) intelligence system and the widening of tax data analytics.

However, the question remains: how much power is too much? Even though tax evasion is a legitimate concern, the risk of mass surveillance, data misuse, and overreach by authorities cannot be ignored. History has shown that broad government powers, once granted, are rarely rolled back. Given India’s mixed track record with surveillance—such as concerns over the Pegasus spyware scandal—citizens are right to question the implications of such sweeping digital search powers. If left unchecked, the bill could set a dangerous precedent for future legislation that undermines digital privacy in the name of national interest.

At its core, the issue is one of balance. Lawmakers must ensure that the bill includes robust safeguards that prevent the arbitrary use of search and seizure powers. Independent oversight mechanisms, judicial review, and strict procedural checks must be put in place to ensure that privacy is not sacrificed on the altar of tax enforcement. If these protections are not embedded into the final legislation, the Income Tax Bill, 2025, may not just be a financial law—it could mark the beginning of an era of unprecedented digital surveillance.