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The Finance Minister, Nirmala Sitharaman, announced that the new Income Tax Bill would be taken up for discussion during the Monsoon Session of Parliament. This announcement followed discussions on the Finance Bill, 2025, in the Lok Sabha. The new I-T Bill, initially introduced on February 13, is currently undergoing scrutiny by the Select Committee, which is expected to submit its report by the first day of the next parliamentary session. Sitharaman emphasized the importance of the new bill, highlighting that digital records would be crucial for tax assessment once the bill is passed. A significant portion of her address focused on addressing concerns regarding taxpayer privacy and explaining how the government uses digital data to track unaccounted money. She defended the provisions in the new bill that allow tax officers to access data from various digital platforms, including Google Maps, WhatsApp chats, and Instagram accounts, stating that such measures are necessary to combat tax evasion. The minister clarified that similar data access provisions exist under the current regulations, particularly in cases involving search and seizure authorized by competent authorities. The new bill aims to clarify the applicability of these provisions to digital records, which were not explicitly addressed in the 1961 Income Tax Act. This clarification is intended to prevent legal challenges based on the argument that the existing law does not cover digital data. Sitharaman explained that the 1961 Act primarily focuses on physical books of account and manual records, leaving a gap when it comes to digital records. This gap has been exploited by individuals seeking protection from sharing passcodes and digital data. The new bill seeks to bridge this gap by explicitly including digital records in the scope of tax investigations. The finance minister provided concrete examples of how digital records have been instrumental in uncovering unaccounted money. She revealed that encrypted messages on mobile phones have led to the detection of approximately ₹250 crore in unaccounted funds. Instagram accounts have been used to establish the beneficial ownership of expensive vehicles and to crack cases of benami properties. Furthermore, Google Map history found on mobile phones has helped tax authorities determine the frequented locations of individuals, leading to the discovery of hideouts where cash and unaccounted transactions were concealed. These examples underscored the importance of incorporating digital elements into the Income Tax Act to keep pace with the evolving methods of tax evasion. Sitharaman also discussed the government's efforts to encourage voluntary disclosure of foreign income and assets. She mentioned a "nudge" campaign, where SMS and emails were sent to approximately 19,501 taxpayers, urging them to review their income tax returns for 2024-25 based on information available to the income tax department regarding their foreign deposits. As a result of this campaign, 11,162 taxpayers revised their returns and declared total foreign assets of ₹11,259.29 crore, disclosing foreign income of ₹154.42 crore. Additionally, 883 taxpayers corrected their status from resident to non-resident. Cumulatively, this initiative led to the declaration of foreign assets worth ₹29,208 crore and foreign income of up to ₹1,089 crore by 30,161 taxpayers. The minister emphasized the effectiveness of this voluntary disclosure approach in uncovering previously undisclosed foreign assets and income.
Sitharaman also addressed the Opposition's concerns about the progressiveness of the Goods and Services Tax (GST). She refuted the allegation that GST is not progressive, presenting data to support her argument. According to her, the wealthiest 20% of Indians contribute 41.4% of household GST and 14.2% of total GST, while the bottom 50% contributes just 28% of household GST and 9.6% of total GST. She argued that this data demonstrates that GST is, in fact, a progressive tax system, as the burden falls disproportionately on higher-income earners. The minister also highlighted that the poorest 50% face an average effective GST rate of only 7.3%. She further compared the current GST regime to the pre-GST era, noting that the average indirect tax rate was around 15% before GST was introduced, whereas the average GST rate as of March 2023 was just 12.2%. This reduction in the average tax rate, she argued, benefits consumers across all income levels. The Lok Sabha subsequently passed the Finance Bill 2025, along with various amendments proposed by the government. Amendments proposed by Opposition members were rejected through a voice vote. Sitharaman described the Finance Bill as providing unprecedented tax relief and projected a realistic 13.14% growth in personal income tax collection, supported by solid data. Regarding an amendment to abolish the 6% equalisation levy on online advertisements, she explained that this decision was made to address uncertainty in international economic conditions. This levy was initially introduced to tax the revenue earned by foreign companies from online advertising services provided in India. Its abolition is intended to create a more favorable environment for international businesses and to reduce potential trade disputes. The minister also discussed customs tariff rationalisation, stating that the Union Budget aims to boost domestic production and enhance export competitiveness by reducing duties on raw materials and inputs. This measure is intended to make domestic products more cost-effective and to encourage local manufacturing. By reducing the cost of raw materials and inputs, Indian manufacturers will be better able to compete with foreign producers in both domestic and international markets. The overall objective of the Finance Bill and related measures is to simplify the tax system, reduce tax evasion, and promote economic growth.
In summary, Sitharaman's statements and the passage of the Finance Bill 2025 represent a significant step in the government's efforts to modernize the tax system, combat tax evasion, and promote economic growth. The emphasis on digital records and data analysis reflects a recognition of the increasing importance of technology in financial transactions and the need to adapt tax laws accordingly. The voluntary disclosure campaign demonstrates a proactive approach to encouraging compliance and uncovering previously hidden assets. The government's defense of the GST system and its efforts to rationalize customs tariffs further underscore its commitment to creating a stable and competitive economic environment. The new Income Tax Bill, once passed, will give tax authorities increased powers, balancing the fight against tax evasion with the preservation of privacy. Finding this balance is key to promoting compliance while upholding individual liberties. The debates and decisions surrounding the Finance Bill highlight the complexities of tax policy and the need for ongoing dialogue and adjustments to ensure that the tax system is fair, efficient, and effective. The use of digital records in income tax assessment and scrutiny as outlined in the article raises important questions about the balance between the government's need to combat tax evasion and individuals' right to privacy. While the government argues that accessing data from platforms like Google Maps, WhatsApp, and Instagram is necessary to uncover unaccounted money, concerns remain about the potential for abuse and the erosion of privacy. Striking the right balance between these competing interests is crucial to maintaining public trust in the tax system and upholding fundamental rights. Furthermore, the effectiveness of the government's efforts to encourage voluntary disclosure of foreign income and assets depends on public awareness and trust. Building confidence in the fairness and transparency of the tax system is essential to encourage taxpayers to comply with their obligations and to disclose previously hidden assets. Continued efforts to simplify the tax system, reduce compliance costs, and provide clear guidance to taxpayers can help to foster a culture of voluntary compliance. The information presented in the article, taken together, forms a comprehensive overview of the present state of the income tax landscape in India.
Source: Digital record will help track unaccounted money: Sitharaman