The Income-tax department will define standard operating procedures to be followed by officers in search and seizure operations involving virtual digital space, like private emails and WhatsApp chats, to protect the privacy of individuals probed. This will be done without compromising on the integrity of investigations into tax frauds, the Central Board of Direct Taxes (CBDT) chairman Ravi Agarwal told FE in an interview..
He said the tax department, using artificial intelligence (AI) recently carried out searches at 150 premises across the country, targeting individuals and entities facilitating fraudulent claims of deductions and exemptions.
New Income Tax Bill
The new Income Tax Bill, 2025, which will replace the Income Tax Act 1961, includes provisions granting tax authorities access to an individual’s “virtual digital space” during search and seizure operations. This means tax officials could potentially see WhatsApp chats, access emails, cloud storage, social media accounts, and other digital platforms to investigate potential tax evasion.
“This is a legal obligation. We are currently defining procedures to further strengthen data protection, addressing the genuine concerns of taxpayers,” Agarwal said.
For instance, he noted, mobile data may contain both personal messages and financial transactions, such as those through WhatsApp. “In such cases, the device must be examined in its entirety to preserve evidentiary value. Nevertheless, once the data is secured, it is the department’s responsibility to ensure that only pertinent information is analysed, and any unrelated personal data is properly redacted and protected,” he said.
Using AI
The income tax department captures 6.5 billion data sets annually from various sources involving transactions in shares, mutual funds, and immovable properties, etc and generates 40 crore annual information statements (AIS) of taxpayers.
Using AI, the department is identifying persons with very high-value transactions but not filing returns to nudge them to pay the right taxes and file returns to broaden the taxpayers base from 90 million in a non-intrusive way, Agarwal said.
Sharing an interesting data, he said about 7.42 crore taxpayers actually saw their AIS statement in FY25, more than three times to gauge their tax liability and whether to file returns.
“About 90 million people are filing the returns, and you have more than about 400 million AIS. So, there is a scope for further increase in the number of returns,” Agarwal said.
The CBDT chief said the average refund time has come down to just 17 days after the return is filed by a taxpayer compared with 38 days in 2020-21 due to end-to-end enabling of e-services.
He urged taxpayers to give correct coordinates, like emails and mobile numbers, as well as bank details for refunds to be processed quickly.