Do You Need To Share Digital Passwords With I-T Officers? Here’s What Select Committee Report On Income Tax Bill 2025 Says

In its report tabled in the Lok Sabha on Monday (21 July), the Parliamentary Select Committee has retained various provisions of the Income Tax Bill 2025, which received criticisms when the Bill was first tabled during the Budget Session.

Notably, the bill was sent for review by a 31-member committee, chaired by BJP MP Baijayant Panda, after its introduction in the Parliament by Finance Minister Nirmala Sitharaman on 13 February, as it was criticised.

According to The Hindu, the Bill retains the provisions that grant tax authorities the power to access, even by force if needed, the social media and private emails of individuals under investigation during search and seizure procedures.

The Narendra Modi government aims to streamline and rationalise the existing Income Tax Act 1961 along with its many amendments made throughout the years since its initiation.

However, the broadened authority granted to tax officials under the new Bill, particularly in search and seizure operations, has attracted critiques and demands for modifications.

Even feedback from specialists, who were consulted by the Select Committee during its evaluation, criticised these measures. Including them, the government presented a report of 4,575 pages in the Lok Sabha.

What new Bill proposes

As per the provisions of the Bill, the concerned person is bound to give “reasonable technical and other assistance (including access code, by whatever name called) as may be necessary” to the designated income tax officer to check “any information, electronic records and communication or data contained in or available on such computer systems”.

The concerns over privacy are raised as the Bill also says that the authorised officer can have access to these electronic systems by “overriding the access code to any said computer system, or virtual digital space, where the access code thereof is not available”.

A 'virtual digital space' encompasses elements such as social media profiles, online trading and investment portfolios, bank accounts, remote or cloud servers, and digital application platforms.

The report indicates that during the Committee's review of the Bill, the stakeholders they consulted expressed serious concerns about certain provisions and suggested keeping access codes of social media accounts out of the purview of relevant sections of the new Bill.

Another suggestion was that the Bill should make clear that the use of information from the accessed personal email addresses and computer systems “shall be made only to the extent it is relevant for the Income-Tax Act and not for any purpose beyond the Income-Tax Act”.

One more suggestion was that “tangible reasons for seeking access may be recorded in writing prior to any such activity being undertaken”.

However, the Select Committee has contended that the stipulations in the new Bill are essential, thus recommending no modifications to them.

The report noted, "In most of the cases of search operation the taxpayers do not share the password/login credential of online forums/portals/e-mail accounts, etc," while “Various incriminating evidence and material are found/seized from electronic records, including WhatsApp communications, emails, etc.”

It added, “This is because various encrypted communication modes are being used by taxpayers to communicate and discuss their unaccounted transactions,” and hence, “The amendment has been rightly made to rationalise the provisions. Thus, the suggestion is not feasible.”

Regarding the suggestion that tangible reasons for providing access should be provided, the Committee said this was “not feasible” as it “seeks to provide safeguard in the statute to prevent abuse of power by Revenue officials as well as protect the privacy of taxpayers”.

Improvements

The Committee's report indicates that the new Bill significantly simplifies India's income tax laws. It notably reduces the word count of the legislation to 2,59,676 from the previous 5,12,535 words in the Income Tax (I-T) Act 1961, marking a major advancement.

The count of chapters in the new Bill has been significantly cut down to 23 from the previous 47, also the sections have seen a reduction to 536 from the earlier 819. However, in a move to enhance clarity, the new Bill has expanded the number of tables it includes from 18 to 57, and the quantity of formulae has seen a substantial increase from 6 to 46.

“The language has been simplified, making the document easy to read and understand,” the Committee’s report said, adding, “The drafting style of the new Bill is straightforward and clear, making the provisions easier to understand.”

Also, redundancies and the need for cross-referencing between Sections and Chapters have been eliminated, and “Greater clarity has been brought in the Act without any structural or policy changes and without disturbing the long-settled taxation principles.”