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This Bill gives tax officers powers to override the access code of computer systems and virtual digital space, including social media, online trading and investment accounts as well as cloud servers, in search and seizure cases.
The New Income Tax Bill, 2025, extends inspection powers to virtual digital spaces to ensure undisclosed cryptocurrency holdings are not overlooked, says a chartered accountant.
The Income Tax Bill, 2025, which aims to simplify the income tax provisions by tweaking its language and wordings, is back in the news for something taxpayers would not hope. According to a provision in the Income Tax Bill, tax officials will have power to access electronic records like emails, social media, and WhatsApp chats if they suspect undisclosed cryptocurrency holdings.
However, sources say that it will be done only where officials find some irregularities.
This Bill, which seeks to replace the Income Tax Act of 1961, gives tax officers powers to override the access code of computer systems and virtual digital space, including social media, online trading and investment accounts as well as cloud servers, in search and seizure cases. This power, however, will be available to the officers above the rank of joint commissioner only.
The Bill includes a new terminology “virtual digital space” in the clause relating to search and seizure cases.
As per the Bill, virtual digital space encompasses any digital realm that allows users to interact, communicate and perform activities using computer systems, computer networks, communication devices, and includes email servers, social media accounts, online investment account, trading account, banking account, etc; any website used for storing details of ownership of any asset; remote server or cloud servers; and digital application platforms.
According to a Moneycontrol report citing experts, the proposal prevents tax evaders from exploiting loopholes in the digital economy as crypto trading booms in India.
Currently, cryptocurrencies attract a flat 30 per cent tax rate on gains, with 1 per cent Tax Deducted at Source (TDS).
The move aligns taxation powers with technological advancements, ensuring that virtual digital assets such as cryptocurrencies, do not escape scrutiny, tax expert Ajay Rotti said, according to Moneycontrol.
‘No New Power, Reiteration of Existing Provisions’
These powers are not new but a reiteration of existing provisions in a clearer form. “The law already permits tax officials to inspect electronic records during search and seizure actions. The new bill extends this to virtual digital spaces to ensure undisclosed cryptocurrency holdings are not overlooked,” chartered accountant Hemant R said.
Section 247 of the bill allowing authorised officers to gain access by overriding the access code of a computer system or virtual digital space is only the reiteration of the already existing provision in a simpler language. No additional power has been given to the tax authorities, experts said.
At present, Section 132 of the I-T Act enables authorised officers to require any person who is found in possession of books, accounts or other documents in the form of electronic records to inspect such documents as well as to seize such documents.
The Income Tax Bill, 2025, was introduced in Parliament last month and is now being reviewed by a select committee, which will hold discussions with stakeholders before finalising it.