The provision of search and seizure, including in the digital sphere, was already there in the Income Tax Act, 1961, said RN Parbat, Member (Legislation), Central Board of Direct Taxes, adding that this has now been explicitly stated in the new Income Tax Act, 2025.
“The provision of search and seizure was there in the old Act also. We can search the digital space under it as the definition of books of account definition includes books of accounts maintained in digital form. Only thing is now in the new Act, the power has been given in explicit form,” Parbat told Business Today in an interview.
Noting that search and seizure is done to uncover undisclosed income, he pointed out that if such records are maintained online or on the cloud or if the funds are invested in virtual digital assets, tax authorities need to access it.
Parbat also pointed out that search and seizure operations are few in a year and the provision to override assessees passwords is only invoked in these cases. “It is essential to discover the undisclosed income and get the taxes due to the nation,” he underlined.
The Income Tax Act, 2025 has specific provisions on virtual digital spaces under which digital search and seizure under which tax authorities can access electronic documents and can override passwords of assessees during search and seizure operations. The move has raised concerns over digital privacy and overarching powers of the tax authorities.
However, Parbat underlined that there is no overreach and these are all essential parts of the search and survey operations. “We have to have passwords to discover the undisclosed income, undisclosed assets,” he said, pointing out that even earlier when physical assets were kept in lockers or some receptacles, the income tax department had the power to break open the locker if key was not being provided by the assessee.
Meanwhile, commenting on further changes in income tax in the Union Budget 2026-27 following the passage of the new Income Tax Act, Parbat said it is the prerogative of the ministry and will be decided closer to the date.
The Income Tax Act, 2025, is set to come into effect from April 1, 2026. It received the President’s assent on August 21, 2025, after being passed by Parliament in the Monsoon Session.
