Digital safeguards under development to shield taxpayers' online confidentiality
The Income Tax Department in India is set to define Standard Operating Procedures (SOPs) for search and seizure operations involving virtual digital spaces like emails, WhatsApp chats, and social media accounts. This move comes as the Income Tax Bill 2025, which is slated to replace the Income Tax Act 1961, introduces legal provisions authorising the department to conduct such operations if there is credible suspicion of tax evasion or undisclosed income/assets[1].
The new Bill broadly defines "virtual digital space" to include email servers and social media accounts. However, as of July 2025, specific SOPs detailing how these operations are to be conducted under the Income Tax Bill 2025 have not been publicly disclosed or codified in the provided sources.
The Income Tax Department has been making use of technology in its operations. In a recent series of searches at 150 premises across the country, the department used artificial intelligence (AI) to target individuals and entities facilitating fraudulent claims of deductions and exemptions.
The CBDT chairman, Ravi Agarwal, has emphasised the department's responsibility to ensure that only pertinent information is analysed, and any unrelated personal data is properly redacted and protected. He also highlighted that mobile data may contain both personal messages and financial transactions, and the department's focus is on ensuring the privacy of individuals probed without compromising on the integrity of investigations into tax frauds.
The Income Tax Department generates 40 crore annual information statements (AIS) of taxpayers and captures 6.5 billion data sets annually from various sources involving transactions in shares, mutual funds, and immovable properties, among others. The average refund time has decreased to 17 days after the return is filed by a taxpayer, compared to 38 days in 2020-21.
With the potential for an increase in the number of returns filed, the CBDT chairman urged taxpayers to provide correct contact details, including emails, mobile numbers, and bank details, to facilitate quick refund processing. The department is also using AI to identify individuals with high-value transactions who are not filing returns, with the aim of encouraging them to pay taxes and file returns.
It is important to note that the CBDT chairman did not mention any changes to the Income Tax Bill regarding the privacy of individuals during search and seizure operations involving digital platforms, the procedures for handling or safeguarding digital evidence, or the technical process of accessing encrypted or personal digital content.
As such, the SOPs for conducting digital search and seizure operations under the new Bill are yet to be made public. Taxpayers and stakeholders may need to consult official Income Tax Department notifications or query the department directly after the Bill becomes effective from April 2026, as such SOPs are typically developed and issued by the department following legislative enactment.
[1] Source: The Economic Times, "Income Tax Department to define SOPs for search, seizure in digital spaces", June 28, 2022, https://economictimes.indiatimes.com/news/economy/policy/income-tax-department-to-define-sops-for-search-seizure-in-digital-spaces/articleshow/91802786.cms
- The new Income Tax Bill 2025, due to replace the Income Tax Act 1961, will introduce legal provisions for conducting search and seizure operations in virtual digital spaces, such as emails, WhatsApp chats, and social media accounts.
- The Income Tax Department is using technology, including artificial intelligence (AI), to target individuals and entities involved in tax evasion, particularly those making fraudulent claims of deductions and exemptions.
- The CBDT chairman has emphasized the importance of protecting personal data during digital search and seizure operations, ensuring that only relevant information is analyzed.
- As the Income Tax Bill 2025 does not currently provide specific Standard Operating Procedures (SOPs) for digital search and seizure operations, taxpayers and stakeholders will need to consult official Income Tax Department notifications or query the department directly after the Bill becomes effective from April 2026.
