New I-T bill allows officials to access emails, WhatsApp chats to unearth undisclosed crypto assets

The bill prevents tax evaders from exploiting loopholes in the digital economy

A proposal in the Income-Tax Bill, 2025, allows officials to access electronic records such as emails and WhatsApp chats if they suspect undisclosed cryptocurrency holdings.

The bill, which seeks to replace the I-T Act, of 1961, extends existing search and seizure provisions to the digital realm, allowing officers to inspect virtual assets when they have a reason to believe that a person has concealed taxable income.

The proposal prevents tax evaders from exploiting loopholes in the digital economy, experts have said, as crypto trading booms in India.

Cryptocurrency transactions are taxed at a flat 30 percent rate on gains, with 1 percent Tax Deducted at Source (TDS).

The proposed legislation enables officers above the rank of joint commissioner to override access controls of electronic devices and digital platforms if necessary. This includes accessing cloud storage, encrypted communication channels, and digital asset exchanges to gather evidence of tax evasion.

The move aligns taxation powers with technological advancements, ensuring that virtual digital assets such as cryptocurrencies do not escape scrutiny, tax expert Ajay Rotti, Founder, Tax Compaas, said. “This is not a privacy issue, strictly speaking. I-T officials cannot randomly gain access to your emails or social media accounts. They can do so only if they have reasons to believe that you are concealing any income and after obtaining approvals from joint or chief commissioners. And mind you, they can take this action even now. To prevent litigation by individuals who may claim that the virtual space is their personal space, a clarification has been added under the provisions of the new Income Tax Bill," he said.

These powers are not new but a reiteration of existing provisions in a clearer form. “The law already permits tax officials to inspect electronic records during search and seizure actions. The new bill extends this to virtual digital spaces to ensure undisclosed cryptocurrency holdings are not overlooked,” chartered accountant Hemant R said.

Section 247 of the bill allowing authorised officers to gain access by overriding the access code of a computer system or virtual digital space is only the reiteration of the already existing provision in a simpler language. No additional power has been given to the tax authorities.

At present, Section 132 of the I-T Act enables authorised officers to require any person who is found in possession of books, accounts or other documents in the form of electronic records to inspect such documents as well as to seize such documents.

“The provision around virtual digital space has been introduced under the section that pertains to search and seizure procedures. No official can simply walk in to your house and ask you to show your jewellery, unless they have reliable information about undisclosed income. If you refuse to open your cupboard, they can break open the locks," said Rotti. Under section 132, the approval of an officer above the rank of joint commissioner is needed to conduct such operations. "Likewise, the officials cannot override your access codes, without presenting a strong case for suspected tax evasion, following the set procedure and obtaining necessary approvals," he added.

During search and seizure, officials can access evidence that has tax implications in digital space in forms such as desktop, mobile, laptops, hard disk drives, storage servers Software as a Service (SaaS) clouds, Enterprise Resource Planning (ERP) systems. They can also access communication platforms like emails, WhatsApp, Telegram and virtual digital assets like cryptocurrency, it says.

The Income-Tax Bill has been introduced in Parliament and is being reviewed by a select committee, which will hold discussions with stakeholders before finalising it.

According to a Reuters report, cryptocurrency trading is seeing a huge rise in India, especially in smaller towns. Trading volumes of bitcoin, ethereum, dogecoin and other cryptocurrencies on four of the country’s largest exchanges grew more than two-fold quarter-on-quarter to $1.9 billion in the December quarter, Reuters said in a report citing data from aggregator CoinGecko. Overall, India's crypto market is expected to grow to more than $15 billion in 2035 from $2.5 billion in 2024, the report said