The parliamentary standing committee has decided to retain key provisions of the proposed Income Tax Bill related to digital search and seizure.
This decision has reignited debates around privacy, surveillance, and the balance between individual rights and state authority.
The Ministry of Finance, in its statement to the panel, clarified that the right to privacy is not absolute. According to the Ministry, restrictions are justified under legitimate State aim, and actions must follow the principles of necessity and proportionality.
These provisions have been a focal point of criticism from digital rights activists, privacy watchdogs, and sections of the opposition.
New Powers for Tax Authorities in the Digital Age
The new Income Tax Bill seeks to modernize India’s tax system by recognizing the growing role of digital platforms in financial transactions.
Under the proposed law, tax officials will have the authority to search and seize digital assets, including emails, cloud-based data, and other forms of digital evidence.
The Ministry justified the proposal by citing an increase in tax evasion through encrypted apps, hidden accounts, and online transactions.
These tools, it said, have made it difficult for authorities to collect credible evidence using traditional methods.
By extending search and seizure powers to the digital domain, the government hopes to close tax loopholes and boost revenue collections.
Concerns Raised Over Privacy and Oversight
However, critics argue that these powers could lead to excessive surveillance and data overreach.
Civil liberties groups have pointed out that the provisions lack clear safeguards, such as mandatory judicial oversight or time-bound access to personal data.
They warned that without such checks, the digital search clause could become a tool for harassment or political targeting.
A representative from the Internet Freedom Foundation (IFF) told the panel that digital searches must be conducted only with prior warrants, and mechanisms must be created to notify individuals post-inspection.
Government Responds to Allegations
In its response, the Finance Ministry argued that existing safeguards under the IT Act and CrPC are adequate.
It stated that digital evidence is already a part of investigations across various enforcement agencies and courts, and the new bill merely formalizes the process for taxation cases.
The Ministry emphasized that all actions under the new law will follow a framework rooted in “legitimate State aim”, and that privacy is not a blanket right.
It also cited international examples where tax agencies have powers to retrieve digital evidence, particularly in OECD countries.
Industry and Legal Experts Weigh In
Some legal experts supported the panel’s decision.
Senior advocate Arvind Datar said that modern financial crimes often leave digital footprints, and empowering tax authorities is crucial in a digital economy.
However, he also suggested the addition of guidelines to prevent arbitrary use of these powers.
Meanwhile, industry executives remain cautiously optimistic.
A spokesperson for the Confederation of Indian Industry (CII) said businesses are willing to cooperate but expect clarity on what constitutes digital overreach.
Many are urging the government to release detailed rules and definitions before implementing the law.
Political Reactions and What Comes Next
The bill has found mixed reactions across political lines.
While the ruling alliance backed the provisions, opposition leaders from the Congress and Trinamool Congress raised concerns over “creeping authoritarianism”.
They demanded the bill be reviewed by a special parliamentary committee focusing on privacy rights.
The bill is now expected to be tabled in Parliament during the monsoon session. If passed, the digital search and seizure provisions will become enforceable within a year.
A final set of rules and compliance guidelines will be notified by the Central Board of Direct Taxes (CBDT).
Why This Matters for You
If you’re a business owner, digital entrepreneur, or individual taxpayer, this bill could have far-reaching consequences.
From cloud storage to encrypted messaging apps, your digital footprint could come under scrutiny in tax investigations.
While the government promises safeguards, citizens and businesses alike must stay informed and prepared.
The debate underscores a larger shift: as India’s tax regime gets more tech-savvy, the lines between digital privacy and public interest will continue to blur.