No excessive powers to tax officials under new law; SOP for digital assets soon: Govt

Amid concerns over the power being given to tax officials to access digital accounts of people under the new Income Tax Act, the Finance Ministry has clarified that these are not “excessive powers” and will only be used when the department has “complete evidence or information of tax evasion”. In an interview with The Tribune, RN Parbat, Member (Legislation) at CBDT, stated on Monday that the authority will provide a standard operating procedure for handling of digital assets which are seized.

To educate taxpayers, CBDT plans to issue FAQs, guidance notes, and a mapping of old and new provisions, as announced by the Finance Minister, Parbat said, adding that these steps aim to dispel apprehensions and ensure a smooth transition to the new framework by April 2026.

The Income Tax Act, 2025, set to replace the six-decade-old Income Tax Act of 1961, has ignited concerns over the expanded powers granted to tax authorities, particularly regarding access to digital assets. The new legislation, which received Presidential assent on August 21 and will take effect from April 1, 2026, aims to simplify India’s tax system but has raised apprehensions about privacy and overreach.

The Act allows tax officials to access “virtual digital spaces”, including WhatsApp, emails, social media accounts, and cryptocurrency wallets, during search and seizure operations. “These are not excessive powers. These are the powers required to enforce the law. These powers were already there... We have given it more clear text in the act. These actions take place only when we have got complete evidence of or information of evasion of tax only then we take these actions and these actions are not common. So it’s not that every common taxpayer will have some issues due to this. Only the persons who are found to be evading taxes, they will be affected. And it’s not excessive,” Parbat said.

“...so far as digital assets are concerned. See, search and seizure takes place to uncover undisclosed income. So undisclosed income can be found recorded in duplicate sets of books of accounts or records, which are being kept on cloud or online... So we need access to that. Similarly, undisclosed income is invested in virtual digital assets also. So in order to seize them, in order to realise taxes out of them, we need to have access to them.”

The legislation, driven by the vision of Prime Minister Narendra Modi and announced by Finance Minister Nirmala Sitharaman in the July 2024 Budget, seeks to make the tax system more concise and comprehensible, Parbat said. The 1961 Act, burdened by over 4,000 amendments and redundant provisions, has been streamlined from 819 sections to 536, organised into 23 chapters with simpler language.

“Many redundant provisions are there which are no longer in use, so those were identified and separated, then the language used was typical legal language -- provisos, explanations. So that was very difficult for common people to understand. Whereas our Income Tax Act touches the life of everybody in the country. So we framed the entire act in simple language, so that common persons can understand that,” Parbat said, adding that many provisions related to non-profit organisations, even salaries, were scattered in different chapters under the old law. "So all these were brought into one specific chapter,” Parbat said.

The Act also introduces the concept of a unified “tax year”, replacing the confusing “previous year” and “assessment year” terms, aligning with global practices. Addressing concerns about accountability, the CBDT official noted that tax officials remain fully accountable. “So far as accountability is concerned, I assure you the tax officials are totally accountable for their duties and whatever duties have been provided to them in the act and they work accordingly within the limit of the act,” he said.

While the Act promises a modern, taxpayer-friendly system, the expanded powers for tax authorities have sparked a debate over balancing enforcement with privacy.