Proposal for Access to Virtual Digital Space in Tax Investigations
The Finance Minister has proposed a provision in the Income-Tax Bill, 2025, allowing tax authorities to access an individual's "virtual digital space" during search and seizure operations. This move aims to adapt enforcement to the shift of financial activities online.
Current Legal Framework
- Section 132 of the Income-Tax Act, 1961, permits search and seizure in physical spaces.
- The proposed Bill extends these powers to digital spaces, raising concerns over privacy and potential overreach.
Concerns and Implications
- Digital spaces encompass more than relevant tax investigation data, involving multiple stakeholders.
- Accessing digital spaces like social media can expose information about family, friends, and professional contacts.
- The Bill's broad definition of ‘virtual digital space’ includes emails, cloud drives, and social media accounts.
Operational Challenges
- The Bill empowers tax authorities to bypass access codes, with uncertainties in cases involving encrypted apps.
- Professionals, such as journalists, face risks to confidentiality and privacy.
Judicial Oversight and Privacy Standards
- The Supreme Court issued interim guidelines in 2023 for digital device seizures.
- Global standards emphasize statutory protections and procedural safeguards for search and seizure.
- Canada and the U.S. have established rights against unreasonable searches, requiring warrants and reasonable grounds.
Proposed Indian Provision vs. Global Standards
- The Bill contrasts with the proportionality test from the Justice K.S. Puttaswamy case, lacking judicial oversight.
- Unfettered access to personal digital data without safeguards fails privacy protection standards.
Way Forward
- Enforcement should adhere to principles of proportionality, legality, and transparency.
- The Select Committee reviewing the Bill is expected to refine the definition of ‘virtual digital space’.
- Recommendations include requiring judicial warrants and establishing redress mechanisms for individuals.
The aim is to ensure that regulatory actions do not erode privacy rights, avoiding unchecked surveillance in the name of compliance.