‘Working on procedures for what happens with seized digital data’: CBDT official

The Central Board of Direct Taxes (CBDT) is working on Standard Operating Procedures that would govern the handling of digital data obtained during search and seizure operations and would release these rules soon, according to a senior official in the CBDT. 

R.N. Parbat, Member (Legislation) of the CBDT further told The Hindu that the new provisions in the Income Tax Act 2025 that allowed tax officials to override passwords were necessary since taxpayers now store their books of account and financial details in digital form.

“Search and seizure take place to detect undisclosed income and undisclosed assets,” Mr. Parbat explained in an interview. “Right now, in the changing technological world environment, the evidence is being kept online. The duplicate sets of books of accounts have moved to cloud-based systems. Undisclosed income is also being invested in the form of virtual digital assets.” 

“So, in order to complete these search and seizure exercises, our officers need to have access to such systems,” he added. “That is the requirement.” 

The Income Tax Act 2025, unlike the 1961 version that it replaced, explicitly states that tax officers are allowed to override the assessees’ passwords in order to access their digital data during search and seizure operations.

This led to considerable consternation, including among members of the Select Committee tasked with reviewing the Income Tax Bill, about privacy being breached. 

Mr. Parbat, however, said that the CBDT was in the process of finalising the Standard Operating Procedures (SOPs) that would govern what happens to this digital data.   

He further added that the CBDT had formulated the overall rules and forms pertaining to the implementation of the new law and was aiming to release them by the end of this calendar year. 

“When the bill was introduced on February 13, on the same day, our rules and form committee was also formed,” Mr. Parbat explained. “That is a very broad-based effort, so many senior officers are involved.” 

He added that the committee had called for public suggestions on the rules, and had received “thousands” of them from trade and professional bodies. 

“They have formulated the new rules and have made the new forms,” Mr. Parbat said. “We are aiming that by year end we will be ready with our rules. The forms will also be ready when they are required.”