IT Dept's new powers: What social media access means for taxpayers and businesses

Income Tax Bill, 2025, amendment has raised concerns across industries, and disruption in digital advertising and influencer marketing. The new law grants tax authorities access to social media accounts, emails, and cloud storage for scrutiny in cases of suspected tax evasion. 

The IT department, after obtaining the necessary legal approvals in India, can access records of tax evaders whose social media behaviour hints at undisclosed income, money, gold, jewellery or property on which they have not paid the requisite taxes as per the Income Tax Act 1961.

According to the Directorate General of GST Intelligence (DGGI), the central investigation and anti-evasion arm of GST, around 46% of tax evasion cases stem from the non-payment of taxes through clandestine supply and undervaluation. Another 20% involve fake Input Tax Credit (ITC) claims, while 19% relate to the wrongful availment or non-reversal of ITC.

Among sectors, online gaming witnessed the highest evasion in 2023-24, amounting to ₹81,875 crore across 78 cases. The banking, financial services, and insurance (BFSI) sector followed, with Rs 18,961 crore evaded across 171 cases. Works contract services and pharmaceuticals recorded 343 and 22 cases of evasion, amounting to ₹2,846 crore and ₹40 crore, respectively.

Since the implementation of GST in 2017, tax evasion detection has been steadily increasing. The DGGI reported evasion cases worth ₹7,879 crore in 2017-18, ₹19,319 crore in 2018-19, ₹21,739 crore in 2019-20, ₹31,908 crore in 2020-21, and ₹50,325 crore in 2021-22.

The newly introduced Income Tax Bill 2025 grants the government the authority to allow tax officials access to private digital platforms, including emails, social media accounts, and online financial platforms. Introduced in Parliament following the Union Budget 2025, the bill enables tax officers to enter digital spaces to gather evidence if there is suspicion of concealed income or assets.

Addressing concerns over potential misuse, Akshayy S. Nanda, Partner at Saraf and Partners, emphasised that the new law includes checks and balances to prevent arbitrary digital surveillance.

"The income tax authority is empowered to override access codes to any computer system or virtual digital space if there are reasonable grounds to believe that the individual has failed to produce requested financial information. However, any search and seizure operation can only proceed with approval from the relevant authority. Additionally, the Bharatiya Nagarik Suraksha Sanhita, 2023, mandates that search operations must be recorded through audio-video means and submitted to the concerned magistrate to prevent abuse of power."

He also reinforced that “The DPDPA (yet to come into force) requires the authority to safeguard personal data in its possession or control by implementing reasonable security measures to prevent data breaches. So, there are checks in place to ensure that such operations are not conducted arbitrarily and do not result in illegal surveillance. Individuals retain the right to challenge the legitimacy of the search in court and enforce their right to privacy. However, it is important to note that the right to privacy is not absolute, and the government can impose reasonable restrictions, provided those restrictions meet the triple test of necessity, legality, and proportionality.”

Further reinforcing the protective framework, Alay Razvi, Managing Partner at Accord Juris, outlines the legal safeguards available to taxpayers:

"The law should mandate prior judicial approval before tax officers access private digital spaces to prevent arbitrary misuse. Taxpayers can also challenge unwarranted access under the Information Technology Act, 2000, and the upcoming Digital Personal Data Protection Act. A defined procedural framework is essential to prevent fishing expeditions, ensuring that digital scrutiny is conducted lawfully and fairly."