India’s overhaul of its direct tax law through the Income Tax Act, 2025 has intensified debate around search and seizure — one of the most powerful enforcement mechanisms available to tax authorities. With the new law set to come into force on April 1, 2026, its provisions governing entry, inspection, seizure of assets, and access to digital data are under close scrutiny from taxpayers, professionals, and constitutional experts.
What Are Search & Seizure Powers?
Search and seizure proceedings are civil enforcement tools used to detect undisclosed income and ensure tax compliance. Under the Income-tax Act, 1961, these powers were codified primarily in Section 132.
Under the old regime:
- An authorised officer could enter and search buildings, places, vehicles, vessels, or aircraft where undisclosed income or property was suspected.
- Authorities could break open locks, safes, and boxes if keys were not available.
- Officers could seize books of account, documents, money, bullion, jewellery, or other valuable articles believed to represent undisclosed income.
- Statements of persons present during the search could be recorded on oath.
The constitutional validity of search powers under Section 132 has been upheld over time. However, privacy concerns have gained prominence after the landmark judgment in K.S. Puttaswamy v. Union of India, where the Supreme Court recognised the right to privacy as a fundamental right under Article 21 of the Constitution.
What Changes Under the New Income Tax Act, 2025?
While the fundamental objective of detecting undisclosed income remains unchanged, the new Act restructures and modernises the search framework.
1. Explicit Recognition of Digital Spaces
One of the most discussed changes is the express inclusion of “virtual digital space” within the scope of search. The new Act explicitly enables authorised officers to access:
- Emails
- Cloud servers
- Social media accounts
- Online trading accounts
- Remote databases and digital storage
Where access credentials are not provided, officers may override passwords during a validly authorised search. Tax authorities have maintained that digital records were already covered under the old definition of books of account, and the new Act merely clarifies the position rather than expanding substantive powers.
2. Reorganised Structure of Provisions
The new law renumbers and consolidates search-related provisions for clarity:
- Search and seizure: Section 247 (earlier Section 132)
- Requisition of documents: Section 248 (earlier Section 132A)
- Application of seized assets: Section 250 (earlier Section 132B)
- Retention and copies of seized material: Section 251 (earlier Section 132(8))
This restructuring aims to simplify interpretation and reduce fragmentation in the statutory scheme.
Procedural Safeguards Continue
Despite broader digital language, procedural safeguards largely continue from the 1961 Act.
Reason to Believe and Authorisation
A search can be initiated only when a competent authority records “reason to believe,” based on credible information, that undisclosed income or assets exist. This requirement is designed to prevent arbitrary action and has been consistently scrutinised by courts.
Safeguards During Search
Taxpayers retain procedural protections such as:
- Verification of search authorisation
- Presence of independent witnesses
- Preparation of a panchnama documenting seized items
- Receipt of copies of seizure lists
- Right to representation and post-search remedies
These safeguards remain central to judicial review of search proceedings.
Retention Limits and Access to Seized Material
The new Act provides structured provisions regarding retention periods and access to copies of seized material. Taxpayers may challenge prolonged retention and seek remedies through appellate mechanisms.
Judicial Scrutiny and Privacy Concerns
The digital access component of the new Act has triggered constitutional debate. The Supreme Court of India has agreed to examine a Public Interest Litigation challenging the breadth of digital search provisions, particularly on grounds of proportionality and privacy.
Critics argue that explicit authority to access digital accounts and override passwords could potentially infringe informational privacy. Supporters contend that without such powers, enforcement would be ineffective in a digital economy where financial trails are predominantly electronic.
Old vs New: Continuity and Change
Continuity:
- Core objective remains detection of undisclosed income.
- “Reason to believe” standard continues.
- Procedural safeguards such as panchnama and witness requirements remain intact.
- Judicial oversight remains available.
Modernisation:
- Clear statutory recognition of digital and virtual data spaces.
- Structured renumbering and consolidation of search provisions.
- Express authority regarding access to electronic systems.
- Renewed constitutional debate around privacy and proportionality.
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