Why in the News?

The proposed changes in the Income-Tax Bill, 2025 allowing tax officials to access a person’s “virtual digital space” during search and seizure have sparked strong debate about privacy, government surveillance, and misuse of power.

What is the current legal framework for tax-related search and seizure?

• Under Section 132 of the Income-Tax Act, 1961, search and seizure powers are currently restricted to physical spaces like houses, offices, and lockers.
• These powers are exercised based on a reasonable suspicion of undisclosed income or assets, and apply only to the person under investigation.

What does the new proposal change?

• Expansion to digital realm: The new proposal includes access to emails, cloud storage, social media accounts, digital applications, and vaguely “any other space of similar nature.”
• Override of access barriers: Authorities can override access codes of devices to enter these digital spaces.
• Open-ended scope: The vague phrasing leaves room for nearly any digital platform to fall under scrutiny, exposing data beyond the individual concerned.

What are the privacy risks of allowing tax access to digital spaces?

• Deep intrusion into personal life: Digital spaces like emails, social media, and cloud drives contain private, non-financial information. Their access exposes not just the individual but also their family, friends, and professional networks.
• Risk to confidentiality: Professionals like journalists and lawyers could have confidential sources and sensitive data compromised, affecting freedom of expression and legal rights.
• Lack of oversight: The provision allows tax authorities to bypass judicial warrants, violating principles of transparency, accountability, and privacy.

How does the proposal violate the proportionality principle?

• Absence of judicial safeguards: The proposal allows tax authorities to access an individual’s digital data without prior judicial approval or warrant. In contrast, the U.S. Supreme Court in Riley vs California mandated warrants before accessing digital content due to the sensitive nature of personal data.
• No relevance filter for accessed data: The provision lacks a clear distinction between financial and non-financial data, enabling authorities to access personal content unrelated to tax evasion. For instance, a journalist’s device could reveal confidential sources and communications, compromising press freedom.
• Fails the least intrusive means test: The measure does not explore less invasive options to meet enforcement goals and grants sweeping powers without ensuring necessity. The Supreme Court in the Puttaswamy case clearly stated that any restriction on privacy must be necessary and adopt the least intrusive method.

Which global safeguards can India adopt for digital searches?

• Judicial Authorization Before Search: In Canada, Section 8 of the Charter of Rights and Freedoms mandates that searches (including digital) must be pre-approved by a neutral and impartial judge, based on reasonable and probable grounds. This ensures accountability and protects citizens from arbitrary intrusions.
• Warrant Requirement for Digital Devices: In the United States, the Supreme Court ruling in Riley v. California (2014) held that law enforcement must obtain a warrant before accessing data on cell phones, given the deeply personal nature of digital information. This aligns digital privacy with Fourth Amendment protections against unreasonable searches.
• Taxpayer Bill of Rights: The U.S. Internal Revenue Service (IRS) enforces the Taxpayer Bill of Rights, which guarantees that searches are not more intrusive than necessary and are conducted with due process. It emphasizes that digital investigations must follow legal safeguards, respecting taxpayer privacy.

Way forward: 

• Mandate Judicial Oversight and Clear Warrants: Any access to an individual’s digital space must require prior approval from a neutral judicial authority, based on tangible evidence and specific relevance to the tax investigation.
• Define ‘Virtual Digital Space’ Narrowly and Precisely: The term should be clearly limited to platforms directly linked to financial transactions, excluding unrelated personal data, to prevent excessive intrusion and ensure proportionality.

Mains PYQ:

[UPSC 2024] Right to privacy is intrinsic to life and personal liberty and is inherently protected under Article 21 of the Constitution. Explain. In this reference discuss the law relating to D.N.A. testing of a child in the womb to establish its paternity.

Linkage: This question directly addresses the fundamental right to privacy, which is the central concern raised by the proposed digital search powers in the Income-Tax Bill, 2025. The article explicitly states that the Bill “raises significant concerns about privacy, overreach, and surveillance” and emphasizes that “The right to privacy cannot and must not be eroded under the garb of regulatory action”.

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