Last month, Union Finance Minister Nirmala Sitharaman tabled the Income Tax Bill, 2025 in Parliament. Once passed in Parliament, the proposed law will replace the existing Income Tax Act, 1961.
With this proposed legislation, which is expected to come into force on April 1, 2026, the government aims to simplify and modernise the tax system. However, some of its provisions have sparked debate. In particular, questions are being raised about the additional powers given to tax officials and their increased access to taxpayers’ digital data.
This expanded enforcement power is outlined in Section 247 of the Income Tax Bill, 2025, which corresponds to the existing Section 132 of the Income Tax Act, 1961, though with expanded coverage.
Expanded powers of search and seizure
Section 247 of the Income Tax Bill, 2025 gives tax officials more powers than ever before, especially in the matter of search and seizure of digital and electronic data. Earlier, the Income Tax Department’s investigation was mainly limited to paper documents and physical premises, but the new law is now taking it to the digital world as well.
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This means that now officials can easily access email servers, social media accounts, online banking, trading and investment accounts, cloud storage, digital wallets and payment applications. Earlier, if any digital data had to be investigated, separate permission had to be taken for it, but now officials have got the power to collect information even by bypassing passwords and access codes.
With this change, surveillance capabilities will increase more than ever. While earlier officials could only search offices, homes, vehicles or a person, now digital platforms can also be monitored.
The new Bill will allow tax officials to directly seize digital records, which will make it easier for them to collect digital evidence related to tax evasion. This may help prevent tax evasion, but it has also raised concerns about privacy and data security of ordinary taxpayers.
Temporary attachment of property: What will change now?
Now tax officials can immediately attach the property during the search itself, and there will be no need to give any separate notice for this as before. This attachment can continue for a maximum of six months, making it impossible to sell that property or transfer it to someone else.
What is the difference between before and now?
Till now, under the existing Income Tax Act, separate permission was required to attach property, and this process could not be implemented immediately during the search. The officials had to first complete the necessary formalities, only after which the property could be attached. But this rule has been changed in the new Income Tax Bill, 2025.
Now tax officials can immediately attach the property during the search itself, and no additional approval or formal process will be required for this. This will give more powers to the tax officials, but at the same time, the concern has also increased that this provision may be misused.
Virtual attachment: What is the new system?
A new provision has been added to the Income Tax Bill, 2025, which is being called ‘virtual attachment’. This means that tax officials can stop the sale or transfer of any property without even taking possession of it. This rule will also apply to real estate, shares, bonds and other financial assets.
Under the current law, if it was not possible to seize assets like cash, jewellery or shares, the authorities could only issue an injunction. But there was no formal provision for ‘virtual attachment’. Now, tax officials can put a legal hold on property without taking physical possession, making it impossible to use, sell or transfer it.
Implications for taxpayers
“This legal framework modernizes tax investigations by aligning enforcement powers with technological advancements. However, concerns regarding privacy, data security, and potential misuse of such broad access powers highlight the importance of clear safeguards and oversight mechanisms. Commencing from FY 2026-27, individuals and businesses must ensure full compliance with tax regulations to avoid scrutiny under these expanded search and seizure powers,” according to CA (Dr.) Suresh Surana.
CBDT may later issue detailed rules and guidelines
The exact implementation framework for these expanded powers may be determined once the Income Tax Bill, 2025 is enacted.
The Central Board of Direct Taxes (CBDT) may issue detailed rules and guidelines, specifying the conditions and procedures under which tax authorities can access social media accounts, emails, and digital financial records, says Surana. Until official notifications are released, the scope and operational details of these provisions remain subject to further clarification by the government, he adds.
Investors’ rights
While the Income Tax Bill, 2025 expands the government’s authority to access digital financial records and/or virtual digital space, taxpayers do have legal rights to privacy of their information, due process, and fair investigation. The following rights apply in the context of tax investigations and digital access by the authorities:
Right to privacy and protection against unlawful access
The right to privacy is a fundamental right under Article 21 of the Constitution of India. Any action taken by tax authorities must adhere to constitutional safeguards and cannot be arbitrary or excessive, feels Surana. Under the Information Technology Act, 2000, unauthorised access to personal data, including social media, emails, or digital assets, is subject to strict data protection laws, adds Surana.
Right to due process and fair investigation
“Tax authorities cannot conduct arbitrary searches or seizures without following proper legal procedures and obtaining necessary authorizations. If a taxpayer is accused of evasion, they have the right to be heard and present their case before any penalty or prosecution is imposed,” adds Surana.