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The Government of India recently released the revised Income Tax Act 2025. But a section in this new act is making headlines. This section is Section 247. In this article, we will understand what is this section and why it is controversial.
Section 247 of the Income-tax Act, 2025, strengthens search and seizure powers to combat tax evasion. This section allows officials to access digital data, including emails, social media, and crypto assets. It aligns with the previous Section 132 of the 1961 Act but specifically enables the examination of “virtual digital spaces” and encrypted data. These enhanced powers are strictly for investigations, not routine scrutiny. These powers target tax evasion hidden in emails, cloud accounts, and encrypted devices.
Under the old Section 132 of the Income Tax Act, 1961, searches were largely physical. Officials needed “reason to believe” that a person was concealing income or assets, then could raid premises to seize undeclared cash, jewellery, and documents within prescribed limits. Electronic records could be inspected, but the statute did not explicitly authorise searching computers or phones. The focus was on undeclared gold in bank lockers and cash stuffed in mattresses. Critically, the old law did not compel taxpayers to divulge passwords or decrypt data.
| Basis of Comparison | Section 132 (1961 Income Tax Act) | Section 247 (2025 Income Tax Act) |
|---|---|---|
| Nature of Search | Mainly physical search and seizure | Physical + digital search |
| Focus Area | Cash, jewellery, documents, lockers | Emails, social media, cloud data, crypto, encrypted devices |
| Digital Access | Limited and not explicitly defined | Clearly allows access to “virtual digital spaces” |
| Definition of Digital Space | Not specifically defined | Broad definition including email, WhatsApp, cloud, servers, apps |
| Power to Access Devices | Could inspect electronic records | Can search computers, phones, online accounts |
| Password/Decryption Power | No clear provision to compel password sharing | Can demand passwords and encryption keys |
| Override Access Control | Not specifically allowed | Officers can override device access controls |
| Scope of Search | Premises like house, office, locker | Premises + any digital/virtual space |
| Judicial Approval | No prior judicial approval required | No prior judicial approval required |
| Reason Required | “Reason to believe” income concealed | Same “reason to believe” standard |
| Data on Overseas Servers | Not clearly covered | Can extend to overseas digital data if linked to case |
| Controversy Level | Limited to physical privacy concerns | Raises major digital privacy and surveillance concerns |
The new Section 247 drags tax searches into the digital era. If an authorised tax officer has “reason to believe” that someone has hidden income or crucial evidence, they can search any building, place, vessel, vehicle, aircraft—and now any computer system or virtual space where relevant data may be stored. Tax raids are no longer confined to physical spaces; they extend to our digital lives.
Click here to download Income Tax Act 2025
Section 261(e) defines “virtual digital space” sweepingly to include social media accounts, email servers, online banking and trading accounts, cloud storage platforms, remote servers, and digital apps. A tax search can potentially cover everything from a company’s WhatsApp chats to an individual’s Gmail inbox and iCloud backup. Data on overseas cloud servers could be within reach if deemed connected to an investigation.
A tax officer’s internally recorded belief of concealed income is enough to justify full access to your digital world. Under Section 247(1)(b), once such a belief is recorded, officers can search any premises (physical or virtual) where they suspect data is stored, without advance notice. Section 247(1)(ii)–(iii) mandates individuals and businesses to disclose passwords or encryption keys and permits officers to “override the access control” of any device or account. If you don’t hand over your phone passcode or email password on demand, officials can hack into the device. Any refusal is now explicitly punishable as non-compliance.
End-to-end encrypted messaging services like WhatsApp or Signal could be forced open during a tax raid. The definition of “virtual digital space” is so broad it covers personal chat histories and Internet of Things device data logs.
The new digital search regime lacks independent oversight or prior judicial approval. Under Section 247, tax officers can authorise searches internally without approaching a court.
Click here to download Income Tax Act 2025
What are the concerns raised regarding Section 247 of the Income Tax Act 2025?
Section 247 of the Income Tax Act, 2025 has raised concerns mainly because it gives very wide powers to tax officers to access a person’s digital life. While the purpose is to stop tax evasion, the law allows officials to search emails, social media accounts, cloud storage, online banking accounts, encrypted apps, and even crypto assets. Many people feel this could affect privacy, as personal chats, family conversations, business secrets, and sensitive data may also get exposed during a search. Since the definition of “virtual digital space” is very broad, it may allow access to much more data than just financial records.
Another concern is that these searches do not require prior approval from a court. Tax officers can internally record their “reason to believe” and start a digital search without judicial oversight. Critics say this increases the risk of misuse, harassment, or unnecessary pressure on individuals and businesses. The law also allows officers to demand passwords and encryption keys, and refusal can be treated as non-compliance. This has raised fears about forced decryption and possible violation of privacy rights.
There are also worries about data security. When officials access cloud servers, phones, and business systems, there is a risk of data leaks or exposure of confidential information. Businesses, startups, and professionals may feel vulnerable if their private communications and trade secrets can be accessed so easily. Overall, the controversy is not about stopping tax evasion, but about whether the law provides enough safeguards to protect privacy and prevent misuse of power.
Click here to download Income Tax Act 2025
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