The government has proposed to strengthen legal provisions to track digital assets under the new Income Tax Bill, 2025, as the previous Income Tax Act did not provide adequate legal backing for investigating digital assets, prompting the government to introduce specific measures in the proposed legislation, Finance Minister Nirmala Sitharaman said on March 25.
"Income Tax Law did not give legal backing to check digital assets, so have included it. Added checking of digital elements in the Income Tax Act, Law should give legal backing," Sitharaman said while replying to the discussion on the Finance Bill in the Lok Sabha.
The Finance Minister highlighted that digital forensics played a crucial role in unearthing unaccounted money. "Encrypted messages on mobile phones led to unearthing Rs 250 crore unaccounted money. Evidence from WhatsApp messages of crypto assets has been detected. WhatsApp communication helped unearth Rs 200 crore unaccounted money," she said. She also noted that Google Maps history was used to determine the locations frequently visited to hide cash, and Instagram accounts were analysed to establish benami property ownership.
The move aligns tax enforcement with technological advancements, ensuring that virtual digital assets such as cryptocurrencies do not escape scrutiny. The new bill allows officials to access communication platforms like emails, WhatsApp, and Telegram, as well as enterprise software and storage servers used by businesses to conceal financial transactions. Gathering evidence from digital accounts is not only essential to prove tax evasion before a court of law, but also for computing the exact amount of tax evaded, the Finance Minister said.
Under the new framework, tax officials will be permitted to access encrypted communications, cloud storage, and digital asset exchanges if they have reason to believe that a person has concealed taxable income or cryptocurrency holdings.
The Income Tax Bill, 2025, is currently under review by a select committee of Parliament, which will hold discussions with stakeholders before finalising the legislation. The bill seeks to replace the six-decade-old Income Tax Act, 1961, with a simplified framework to enhance compliance while addressing evolving tax challenges in the digital age.
Direct tax collections
The Finance Minister also stated that direct tax collections had shown considerable buoyancy and expressed confidence in the fiscal estimates. "Collections in PIT (Personal Income Tax) have shown considerable buoyancy. FY26 direct tax collection is realistic, taking into account the dip due to tax relief," she said.
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