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The Bill, which was introduced in the Lok Sabha on Thursday, included a new terminology “virtual digital space” in the clause relating to search and seizure cases.
New Income Tax Bill.
Finance Minister Nirmala Sitharaman has introduced the much-anticipated new Income Tax Bill in Parliament. This bill, a simplified version of the Income Tax Act of 1961, introduces several key changes, including a provision giving tax officers powers to override the access code of computer systems and virtual digital space, including online trading and investment accounts as well as cloud servers, in search and seizure cases, according to news agency PTI.
The Bill, which was introduced in the Lok Sabha on Thursday, included a new terminology “virtual digital space” in the clause relating to search and seizure cases.
As per the Bill, virtual digital space encompasses any digital realm that allows users to interact, communicate and perform activities using computer systems, computer networks, communication devices, and includes email servers, social media accounts, online investment account, trading account, banking account, etc; any website used for storing details of ownership of any asset; remote server or cloud servers; and digital application platforms.
Search and Seizure Provisions
One of the major criticisms of the current Income Tax Act has been the extensive powers granted to tax officials, allowing them to enter premises, conduct searches, and seize assets without providing a clear justification. While the new Income Tax Bill retains search and seizure provisions, it mandates greater cooperation from assessees.
As per the new Bill, tax officials can enter any business or charitable institution and demand that proprietors, trustees, employees, or even “any other person” present at the time provide access to sensitive materials or systems, According to a livemint report citing The Print.
The Income Tax Bill, 2025 has also included the provision that states that tax officers can “gain access by overriding the access code to any said computer system, or virtual digital space, where the access code thereof is not available”.
Technical Assistance A Must
The existing Income Tax Act allows officials to inspect books of account, verify cash and stock, and seek any relevant information for tax proceedings. However, the new Bill goes a step further by explicitly requiring individuals present at the inspected premises to provide technical assistance. This includes granting access to digital records, books of accounts, and even computer systems by sharing “access codes”.
A significant structural change in the new Bill is the replacement of the terms “assessment year” and “previous year” with the newly defined “tax year.” Under this new framework, timelines and tax calculations will now align directly with the financial year in which income is earned and taxed.
These changes mark a shift in India’s tax administration, aiming for greater transparency while also raising concerns over privacy and compliance burdens for taxpayers.
