As the Union Budget 2026–27 draws closer, India’s top accounting body has raised a red flag that could unsettle many taxpayers. The Institute of Chartered Accountants of India (ICAI) has warned that the new Income Tax Act, 2025 gives tax authorities sweeping powers to access personal digital data — including emails and social media — during search and seizure operations, and has urged the government to urgently plug what it sees as a serious privacy gap.
In its pre-Budget memorandum to the finance ministry, ICAI has specifically flagged Section 247 of the Income Tax Act, 2025, arguing that the provision, in its current form, could infringe the fundamental right to privacy. The institute has asked the government to amend the law to restrict tax officials’ access only to official email accounts, instead of allowing unrestricted inspection of all electronic communications.
What does Section 247 allow today?
Under Section 247 of the new Income Tax Act, authorised officers — ranging from Income Tax Officers to Assistant Directors and Assistant Commissioners — are empowered to conduct search and seizure operations if they have “reason to believe” that a person holds undisclosed income, assets, books of account or relevant information.
Importantly, the provision extends these powers to the digital space. It allows tax officials to inspect “any information, electronic record or communication” available on computer systems. This includes emails, data stored on devices, cloud-based information and even social media content.
During a search, authorised officers can:
-Enter and search premises, vehicles or aircraft where undisclosed assets or records are suspected
-Demand access to electronic records and seek technical assistance, including passwords or access codes
-Override access codes to computer systems if required
-Copy, extract or mark digital records
-Prepare inventories and seize books, documents, electronic devices or assets (other than business stock-in-trade)
Why ICAI is concerned
ICAI has said that while search and seizure powers are a necessary enforcement tool, Section 247, as currently drafted, goes too far.
“This provision allows authorised officers to inspect any information, electronic records and communication available on computer systems. This includes emails, social media etc. This provision could infringe the fundamental right to privacy of persons,” the institute said in its memorandum.
The chartered accountants’ body has also warned that granting such wide and unrestricted access amounts to digital surveillance and could be misused. “Grant of such unrestricted power to tax authorities to subject personal digital information to surveillance is a cause of concern,” it noted.
To address this, ICAI has suggested a clear legislative safeguard. It has proposed that Section 247(1) be amended to allow access only to official email accounts of the person concerned. According to the institute, this would strike a balance between tax enforcement needs and constitutional privacy protections.
When are such searches conducted?
Search and seizure operations are not routine actions by the income tax department. These are typically carried out only when authorities have credible information or “reason to believe” that a taxpayer has undisclosed income or assets.
Such actions may also be triggered if a person repeatedly fails to respond to tax notices or does not produce documents or electronic information that are relevant to ongoing tax proceedings. Even so, the scope of digital access during these searches has become a growing concern in the age of smartphones, cloud storage and social media.
What has the government and CBDT said?
Over the past several months, the government and the Central Board of Direct Taxes (CBDT) have sought to allay fears around digital overreach under the new income tax law.
The tax department has consistently maintained that search and seizure powers are not meant for routine surveillance and can be exercised only after due authorisation and internal approvals. Officials have clarified that these powers are to be used sparingly, in serious cases involving tax evasion, and not against ordinary or compliant taxpayers.
CBDT has also underlined that searches are governed by strict procedures, documentation requirements and accountability mechanisms. According to the department, authorised officers cannot randomly access data and must act within the scope of the law and the reasons recorded for initiating a search.
However, ICAI’s concern is not about intent alone, but about the wording of the law itself. The institute believes that without clear statutory limits, the provision leaves room for interpretation and potential misuse — something that could lead to litigation and erosion of trust.
Why this matters ahead of Budget 2026
The issue has gained significance as Budget 2026–27 is expected to focus on taxpayer rights, ease of compliance and reducing disputes under the new Income Tax Act framework. Privacy, especially in the digital era, has become a sensitive and high-stakes issue for individuals and businesses alike.
By nudging the government to amend Section 247, ICAI is effectively asking for clearer guardrails — so that tax enforcement remains strong, but personal digital lives are not left exposed during searches.
Whether the finance ministry takes up this suggestion in Budget 2026 could set the tone for how India balances tax administration with privacy in the years ahead. For taxpayers, the debate serves as a reminder that under the new law, digital data is very much part of the tax net — and how that power is regulated will matter just as much as how it is used.
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