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The proposed Income Tax Bill, 2025, is generating considerable controversy due to a provision granting the government the authority to override access controls on digital communication platforms. This clause, embedded within the bill's search and seizure powers, has ignited a firestorm of concern among digital rights activists and tax consultancy firms alike. The core issue revolves around the government's potential ability to bypass user-defined security measures, such as passwords, on social media accounts, email services, and even encrypted messaging applications like WhatsApp. This power to “override” access codes, as the bill phrases it, is viewed by many as a significant encroachment on personal privacy and digital security. The bill explicitly defines a virtual digital space, encompassing email servers, social media accounts, online investment and banking accounts, websites storing asset ownership details, remote and cloud servers, digital application platforms, and any other space of similar nature. This broad definition significantly expands the scope of the government's potential reach into individuals' digital lives.
While tax officials argue that the Income-tax Bill primarily aims to clarify existing search and seizure provisions within the current Income Tax Act, the introduction of the access override clause represents a fundamental departure from established norms. The existing I-Tax Act already empowers tax authorities to enter and search premises and forcibly open locks if individuals fail to provide requested documents or financial records following an official summons. It also authorizes the examination of electronic records. The proposed bill maintains these provisions, but critically adds the power to access virtual digital environments and override any access codes that would otherwise restrict entry. This means that tax officials investigating potential tax evasion or under-reporting of income could potentially utilize password-breaking software or request companies offering communication services to bypass an individual's login credentials. This raises serious questions about the security of personal data and the potential for abuse of power. The concern extends to technology companies, including phone manufacturers like Apple, who might be compelled to assist in circumventing a user's passcode. A tax expert, speaking anonymously, emphasized the potentially far-reaching implications of this provision.
Privacy advocates are particularly worried about the potential for this provision to circumvent or nullify protections that might otherwise be offered under the Digital Personal Data Protection Act, even if it were currently in force (which it is not, as draft rules are still undergoing consultation). A common criticism of the Digital Personal Data Protection Act is that it contains overly broad exemptions for government agencies, effectively rendering it ineffective in protecting citizens from government overreach. The proposed access override clause within the Income Tax Bill, coupled with these existing exemptions, could create a situation where individuals have virtually no recourse against government intrusion into their digital lives, even in cases where the alleged tax evasion is relatively minor. Officials argue that under Section 132 of the existing I-T Act, tax authorities already seize electronic devices, such as desktops and hard disks, and collect evidence from communication platforms like emails, WhatsApp, and Telegram, claiming that such evidence is crucial for calculating tax evasion. However, the proposed bill seeks to formalize and expand these practices, explicitly granting the government the power to bypass security protections.
Another tax expert, also requesting anonymity, acknowledged that tax authorities are already requesting individuals under scrutiny to provide access to their online communications and documents. However, the act of overriding access controls has remained a legally ambiguous area. The proposed change aims to explicitly clarify that the government possesses the power to bypass these protections for those under tax investigation. While this clarification is ostensibly intended to streamline investigations and enhance efficiency, it also raises significant concerns about the potential for overreach and the erosion of individual privacy. Vishwas Panjiar, a partner at law firm Nangia Andersen LLP, highlighted that this represents a notable departure from the present Income-tax Act, 1961, which did not explicitly cover such digital domains. He cautioned that, without clear safeguards, these extensive powers could lead to taxpayer harassment or unnecessary scrutiny of personal data.
The Internet Freedom Foundation (IFF), a Delhi-based digital rights body, has formally addressed these concerns in a letter to the Select Committee of Parliament, which is currently deliberating on the bill. The IFF emphasized the need to ensure that the proposed digital search and seizure provisions uphold constitutional safeguards and prevent excessive enforcement powers. The IFF strongly advocates for the explicit incorporation of the proportionality standard, as established by the Supreme Court in its landmark 2017 right to privacy judgment, requiring the use of the least invasive methods. The IFF argues that without these necessary safeguards, the Income-tax Bill, 2025, risks enabling unchecked surveillance and infringing on privacy rights. The core argument is that the government should not be able to arbitrarily access an individual's entire digital life based solely on suspicion of tax evasion. The proposed legislation requires careful consideration and amendment to balance the legitimate needs of tax enforcement with the fundamental rights of citizens to privacy and security in the digital age. Failure to do so could have far-reaching consequences for civil liberties and the future of digital freedom in India.
Source: I-T Bill proposes govt can ‘override’ online access codes, sparking privacy concerns