The New Income Tax Bill has formalised the ‘power’ of tax officers to gain access to individuals’ digital footprints through introduction of the new term 'virtual digital space'. The Bill now allows tax officers to scrutinize emails, social media accounts, and online financial platforms to catch hold of taxpayers with undisclosed incomes and assets.
As per the Bill, if any books of account (in physical form or electronic form), other documents or asset, is found in the possession or control of any person in the course of a search, the tax officers have the right to gain access to those documents including those stored in any computer system, or virtual digital space. In cases where the access code is not available, the officer can gain access by overriding the code to any said computer system, or virtual digital space.
The Bill defines the virtual digital space as computers, computer systems, networks, communication devices, digital or electronic data storage devices, used on stand-alone mode or part of a computer system, linked through a network, or utilised through intermediaries for information creation or processing or storage or exchange, and includes the remote server or cloud server or virtual digital space.
Tax experts say that in cases of search and survey, income tax officers even today can ask for access to computers and information kept in cloud servers, but it was not specified in the law. The New Income Tax Bill has only clarified that if needed tax officers conducting surveys can legally ask for access to information stored in computers, cloud servers including emails and social media platforms.
“It is just a clarification and not an extension of power,” says Akhilesh Ranjan, former member, Central Board of Direct Taxes (CBDT) and advisor, Tax and Regulatory Services, Price Waterhouse & Co LLP.
Meanwhile, some experts have called for safeguards to protect taxpayers from the possible abuse of the law.
“While the government's intention is to use technology to address tax leakage issues but with this privacy is compromised, there should be some safeguards available to the taxpayers, which is not there in the present draft of the law,” Yeeshu Sehgal, Head of Tax Markets, AKM Global, a tax and consulting firm.
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