ICAI Flags Privacy Risks in Income Tax Searches, Seeks Changes Before Budget 2026

As Budget 2026–27 approaches, the Institute of Chartered Accountants of India (ICAI) has warned the government about possible privacy risks in the new Income Tax Act, 2025. The concern relates to the wide powers given to tax officials to access digital data during search operations.

In its pre-Budget note to the finance ministry, ICAI has asked for urgent changes to protect taxpayers’ right to privacy.

What Section 247 of the Income Tax Act Allows

Section 247 gives income tax officials the power to carry out search and seizure operations if they believe someone is hiding income, assets, or financial records.

These powers also extend to the digital space. Officers can access and inspect electronic records such as emails, data stored on devices, cloud storage, and even social media accounts.

Powers Available During a Tax Search

During a search operation, authorised tax officers can:

• Enter and search premises, vehicles, or aircraft
• Demand access to electronic records and passwords
• Bypass security or access codes if needed
• Copy or extract digital data
• Seize documents, electronic devices, and assets

These actions are allowed if officers believe the information is linked to undisclosed income.

Why ICAI Is Worried

ICAI has said that while search powers are important to catch tax evasion, the current wording of Section 247 is too broad.

According to ICAI, allowing access to all emails and social media data could violate a person’s fundamental right to privacy. The institute has also warned that such wide powers could lead to digital surveillance and misuse.

ICAI’s Suggested Fix

To reduce privacy risks, ICAI has proposed a clear change to the law. It wants Section 247 to be amended so that tax officials can access only official email accounts, not personal emails or social media.

ICAI believes this would balance tax enforcement needs with privacy protection.

When Are Such Searches Conducted?

Search and seizure operations are not routine. They usually happen when tax authorities have strong information about undisclosed income or when taxpayers fail to respond to notices or submit required documents.

Still, with most personal data now stored digitally, concerns about data access have increased.

Read more: From GST To Mutual Funds: Here Is How Key Financial Changes From February 1, 2026, Will Impact You!

Government’s Stand on Digital Searches

The government and the Central Board of Direct Taxes (CBDT) have said that these powers are not meant for routine monitoring. According to them, searches require proper approval and are used only in serious cases of tax evasion.

CBDT has also stated that officers must follow strict procedures and cannot randomly access personal data.

However, ICAI feels that clear legal limits are still missing.

Why This Issue Matters Now

Budget 2026–27 is expected to focus on taxpayer rights, easier compliance, and fewer disputes. In this context, digital privacy has become a major concern for individuals and businesses.

Without clear safeguards, broad search powers could lead to legal challenges and loss of trust in the tax system.

Conclusion

ICAI’s warning highlights the growing tension between tax enforcement and digital privacy. As personal data becomes easier to access, clear legal safeguards are essential. Whether the government amends Section 247 in Budget 2026 will be key in shaping trust, transparency, and privacy under India’s new tax regime.

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