Income Tax: Only evaders should fear invasive tax probes
Mint Editorial Board India's Income Tax bill is broadly welcome for simplifying this direct levy, but it has also raised some concern over digital privacy. We should tighten the operating framework under Section 247 to reassure earnest taxpayers. To minimize the scope for Section 247 to become a tool in the hands of venal elements, the taxman's bar for search and seizure operations should be set high. Gift this article
When finance minister Nirmala Sitharaman announced during her 2025-26 Budget speech that the government was planning to overhaul the existing Income Tax Act and introduce a new tax bill, there was a round of applause from all taxpayers.
When finance minister Nirmala Sitharaman announced during her 2025-26 Budget speech that the government was planning to overhaul the existing Income Tax Act and introduce a new tax bill, there was a round of applause from all taxpayers.
The old Act had become cumbersome, difficult to navigate and abstruse across many parts, leading to differing interpretations and irreconcilable disputes. 'The new bill will be clear and direct in text," promised the finance minister, '[…] close to half of the present law, in terms of both chapters and words."
This commitment was roundly welcomed, given the difficulties taxpayers and tax authorities faced in dealing with confusing provisions. The revision's basic aim was to simplify the law's language and retire redundant parts, while retaining the extant tax rates, definitions and framework for offences and penalties.
Also Read: Mint Quick Edit | Income tax: How close should authorities look?
When the new bill's draft was unveiled, it came as a breath of fresh air: it proposed to reduce the number of chapters from 47 to 23 and of sections from 819 to 536.
But then, on closer scrutiny of the draft, alarm bells started going off in various accounting shops and law firms. Accompanied by lobby groups, they started raising a red flag over Section 247, which was viewed as a potential breach of the right to privacy.
This contentious section empowers the taxman to access an assessee's digital assets and online spaces during search and seizure operations with the authority to override any password or access code. This would cover email servers, social media accounts, online investment and trading accounts, and also cloud storage of asset ownership details.
The bill was referred to a select committee of Parliament headed by Bharatiya Janata Party member Baijayant Panda. In their depositions to this panel, Indian tax authorities and finance ministry officials argued that even the current Act allows officials to not only enter and search buildings, but also to break open locks of physical storage spaces for closer scrutiny of their contents.
Given the proliferation of virtual spaces and digital assets, the same provision needs an upgrade to help tax officers ferret out undisclosed income. The authorities also argued that Section 247 does not conflict with the right to privacy, especially if we apply the three-fold test laid down by the Supreme Court's nine-judge bench that heard the K.S. Puttuswamy vs Union of India case.
While the select committee has approved Section 247, with Parliament now expected to debate its fine details, it must be pointed out that history is witness to many such well-intentioned provisions turning into slippery slopes in the absence of sufficient guard-rails.
In its present form, the bill appears to grant too many officers the authority to sanction forced access under a diffused command and accountability structure. This framework could prove prone to misuse, as the past has shown, and should be tightened. For example, publicly revealed instances of phone tapping have shown the innovative misuse of standard operating procedures whose original intent was noble.
To minimize the scope for Section 247 to become a tool in the hands of venal elements, the taxman's bar for search and seizure operations should be set high. This would reassure earnest taxpayers and honour the five-letter foundation of India's proposed Income Tax law: trust. Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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