Proposed Amendments in Income-Tax Bill, 2025

The Finance Minister's proposal aims to empower tax authorities to access an individual's "virtual digital space" during search and seizure operations.

Current Legal Framework

• Existing Provisions: Under Section 132 of the Income-Tax Act, 1961, search and seizure are limited to physical spaces like homes and offices.
• Objective: To find undisclosed income or assets based on suspicion.

Concerns with the New Proposal

• Privacy and Overreach: The proposal extends to digital spaces, potentially infringing on individual privacy.
• Vagueness: The definition of ‘virtual digital space’ includes emails, cloud drives, social media, and more, with open-ended criteria.
• Professional Confidentiality: Risks to journalists and professionals whose work involves sensitive information.

Judicial and Global Standards

• Supreme Court Guidelines: Interim guidelines on digital device seizure highlight the need for clear protocols.
• International Practices:
  • Canada: Charter of Rights and Freedoms safeguards against unreasonable search/seizure.
  • USA: Taxpayer Bill of Rights and Riley vs California decision emphasize legal compliance and warrants.

Proportionality and Privacy

The Supreme Court of India mandates a proportionality test for privacy infringements, requiring state actions to be legitimate, necessary, and minimally intrusive.

Recommendations

• Principles: Uphold proportionality, legality, and transparency in digital enforcement.
• Safeguards: Narrow the definition of 'virtual digital space', require judicial warrants, and ensure transparency in enforcement actions.