The government has proposed new legal provisions to track and investigate digital assets under the Income Tax Bill, 2025. The existing Income Tax Act lacked adequate legal backing for probing digital transactions, prompting the government to introduce specific measures, Finance Minister Nirmala Sitharaman said on Tuesday (March 25).
While addressing the Lok Sabha during discussions on the Finance Bill, the Finance Minister said, “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.”
She further emphasised the growing role of digital forensics in uncovering unaccounted wealth. “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, adding that authorities have utilised Google Maps history to track locations where cash was hidden and examined Instagram accounts to establish benami property ownership.
The proposed bill aligns tax enforcement with technological advancements, ensuring that virtual digital assets, including cryptocurrencies, do not escape scrutiny. The legislation will empower tax officials to access communication platforms such as emails, WhatsApp and Telegram, along with enterprise software and cloud storage used for financial concealment. Sitharaman stressed that gathering digital evidence is essential for proving tax evasion in court and accurately computing evaded tax amounts.
Under the new framework, tax authorities will be permitted to investigate encrypted communications, digital asset exchanges and cloud storage if they suspect tax evasion or undisclosed cryptocurrency holdings.
The Income Tax Bill, 2025, significantly expands the powers of tax officials, particularly in search and seizure operations related to digital and electronic data, FE.com reported earlier this month. Under Section 247, investigations will no longer be confined to paper documents and physical premises, as the law now extends tax scrutiny into the digital realm.
Previously, tax officials needed separate approvals to access digital data during investigations. However, the new provisions grant them the authority to bypass passwords and access codes to retrieve crucial information directly. This eliminates bureaucratic delays and strengthens enforcement against tax evasion through digital channels.
Another major shift is in the attachment of property. Earlier, tax officials had to issue a separate notice before seizing assets. Now, they can attach a property immediately during a search, without prior notice. This attachment can remain in place for up to six months, preventing the owner from selling or transferring the asset during that period.
The Income Tax Bill, 2025, is currently under review by a select parliamentary committee, which will consult stakeholders before finalising the legislation. Aimed at replacing the six-decade-old Income Tax Act of 1961, the bill seeks to modernise India’s tax framework, streamline compliance and address the evolving challenges of digital transactions and financial concealment.
