Income Tax Officers to Get Expanded Digital Search Powers from April 2026
Income tax digital search powers will significantly expand from April 1, 2026, when the proposed Income Tax Bill, 2025 replaces the six-decade-old Income Tax Act, 1961. The new law allows authorised income tax officers to search what the Bill calls “virtual digital space”, including emails, social media accounts, online banking, trading platforms and certain cloud-based services.
However, officials and tax experts stress that this does not permit routine or real-time surveillance of citizens. Access to digital accounts will be allowed only during formally approved search-and-seizure operations, where officers have recorded reasons to believe that undisclosed income or assets exist.
What Has Changed in the Income Tax Law
The Income Tax Bill, 2025 carries forward traditional search-and-seizure provisions that existed under Section 132 of the 1961 Act. These powers are now updated to reflect the realities of a digital economy.
H3: Digital Expansion of Search Powers
A new clause, widely referred to as Clause 247, explicitly includes virtual digital space within the scope of income tax searches. Earlier, search operations were limited mainly to physical premises and tangible assets.
Until now, raids typically focused on cash, jewellery, documents, lockers, computers and storage devices physically found at a location. From April 2026, the same legal authority will extend to remote servers and online platforms where tax-relevant information or assets may be stored.
Tax officials point out that this change does not create a new power altogether. Instead, it codifies and clarifies practices that had already evolved, particularly where digital evidence was accessed through seized devices.
What “Virtual Digital Space” Includes
The definition of virtual digital space under the new law is intentionally broad. Reports citing the Bill indicate that it includes a wide range of online platforms and services.
Platforms and Accounts Covered
Virtual digital space may include:
Email services and servers
Social media platforms such as Facebook, Instagram, X, WhatsApp and LinkedIn
Online banking and trading accounts
Cloud storage services and remote servers
Digital wallets, crypto exchanges and overseas trading platforms
In addition, online businesses and digital marketplaces that store ownership records, transaction histories or financial trails also fall within this scope.
The emphasis is on platforms that can be used to park, route or conceal unreported income, especially across borders.
When and How Officers Can Access Digital Accounts
Despite public anxiety, income tax digital search powers remain tightly linked to existing legal thresholds.
No Routine Monitoring
Access to digital accounts is permitted only during an authorised search operation. Officers must formally record a “reason to believe” that undisclosed income or assets exist. This requirement mirrors the safeguards that applied to physical searches under the old law.
Officials from the Central Board of Direct Taxes (CBDT) have clarified that such search cases are limited in number each year. They do not apply to routine scrutiny, assessments, refunds or compliance checks.
Technical Access During Searches
During an authorised search, officers may require passwords or take technical steps to access protected systems. This may include retrieving relevant data from emails, cloud folders, investment dashboards or trading accounts.
The CBDT has indicated that a Standard Operating Procedure (SOP) will govern how digital platforms are accessed. The SOP is expected to define audit trails, data handling protocols and retention limits.
Safeguards, Limits and Privacy Concerns
The government has repeatedly emphasised that the new income tax digital search powers do not allow blanket surveillance.
Legal and Confidentiality Safeguards
Confidentiality provisions under the old Act, particularly Section 138, continue under the new law as Section 258. These provisions restrict disclosure of taxpayer information except as permitted by law.
Officials insist that access is case-specific, approval-driven and subject to internal checks.
Concerns Raised by Critics
Privacy advocates argue that the broad definition of virtual digital space risks overreach. They warn that compelling access to private emails or social media could have a chilling effect on online speech.
Critics also point to the absence of independent judicial oversight at the authorisation stage. Without strong external checks, they argue, taxpayers may have limited remedies if searches are excessive or misused.
Why the Government Says the Change Is Necessary
Tax authorities argue that enforcement tools must evolve with changing methods of evasion.
Digital Economy, Digital Evasion
Officials say modern tax evasion increasingly relies on encrypted communication, crypto assets, layered online transactions and offshore platforms. Such activity cannot be detected through physical searches alone.
According to the government, the updated income tax digital search powers are aimed at a small group of high-risk cases, not ordinary taxpayers.
CBDT sources maintain that internal approvals, SOPs and documentation requirements will act as safeguards against misuse. Even so, the inclusion of personal digital communications within the search framework has sharply divided public opinion.
