'Officials leak details, destroy reputation': Mohandas Pai says new tax bill should be watered down

Former Infosys CFO Mohandas Pai has strongly criticised the new Income Tax Bill 2025, calling it “a bigger assault on our rights” and urging Prime Minister Narendra Modi to reconsider its provisions. Pai warned that the expanded powers for tax officials, which allow them to access emails, social media accounts, and cloud storage in suspected tax evasion cases, could lead to misuse and harassment.

"Reason to believe is vague and gives too much power. Look at judicial verdicts on such matters where misuse has been found. Talk to people who have suffered random raids. The ill-treatment of people raided, raids in roving inquiry is high," Pai wrote on X.

Under Section 247 of the new bill, officials will have the right to override access codes to computer systems and virtual digital spaces, expanding on the existing search and seizure powers under Section 132 of the Income Tax Act, 1961. The bill, set to take effect from April 1, 2026, is aimed at tackling modern tax evasion methods, but has raised concerns over privacy and potential abuse.

Pai pointed out how tax officials often leak details of searches, make high claims, and destroy reputations, with many cases not holding up in court. He also alleged that people are threatened to declare income to "buy peace". "Our PM Narendra Modi should ask for a relook at this new section and protect citizens from official tax terrorism. A court approval for a raid is the right way," he asserted.

Pai's remarks came in response to taxation expert Ajay Rotti, who argued that the new bill does not introduce new measures but extends existing ones to the digital space. He dismissed concerns that the law would allow arbitrary raids, stating that tax officials cannot act without proper approvals. "The actual proposal is very different from what the headline reads. A lot of panic is being spread on this and it is based on not reading the entire provision and not understanding where this change is proposed," Rotti wrote.

He explained that Section 132 of the Income Tax Act, 1961, already allows tax officials to conduct search and seizure operations, commonly referred to as “raids,” when they have "reason to believe" that a person possesses undisclosed money, bullion, jewelry, or assets. This power is limited to officers above the rank of Joint Commissioner and cannot be invoked without proper justification.

"Section 132 gives power to an officer above the rank of 'Joint Commissioner' ONLY in cases where 'consequence of information in his possession, has reason to believe that' a person has money, bullion, jewelry, or other assets which are not disclosed. This is not a power to be taken lightly and cannot be used without appropriate approvals," he clarified.

The new Income Tax Bill, 2025, extends these search and seizure powers to “Virtual Digital Space”, meaning tax officials can access emails, cloud storage, and online financial accounts if there is credible evidence of undisclosed income. "What is in Section 132 of the 1961 Act is expanded in Section 247 of the ITB, 2025, given the changed circumstances to 'break open the lock of any door, box, locker, safe, almirah, or other receptacle… or gain access by overriding the access code to any said computer system, or virtual digital space, where the access code thereof is not available,'" Rotti explained.

He also questioned why breaking open a physical locker is not seen as a privacy violation while accessing digital accounts is being viewed as excessive enforcement. "While breaking open your almirah was not a violation, how can overriding your computer system to see your emails be a violation?" he asked, adding that rigorous approval processes remain in place to prevent misuse.