Finance Minister Cites Crypto Fraud Cases to Back Digital Data Access

Indian Finance Minister Nirmala Sitharaman has justified a new tax bill provision that gives tax authorities access to digital records, citing its need to fight financial fraud, especially in cryptocurrency transactions.

She highlighted a key case where tax authorities uncovered ₹90 crore worth of illicit crypto dealings through WhatsApp messages, stressing the need for legal backing to examine such digital evidence.

Sitharaman said tax investigators used encrypted messages to monitor people who were engaged in unaccounted cryptocurrency transactions. The case illustrated how digital assets are being used more and more for tax evasion and financial misconduct, and hence, access to digital information is crucial for enforcement agencies.

At present, the Income Tax Act of 1961 mostly pertains to physical accounts such as books of accounts, ledgers, and handwritten financial transactions. However, with the advent of the digital era, financial information tends to be electronically stored, making it essential for tax authorities to access mobile data, encrypted messages, and other online records.

The FM has noted that tax evaders would typically claim, “I have shown my ledger, why do you need my phone data?”—a gap the new legislation seeks to shut.

Other cases mentioned by Sitharaman include a fake billing racket worth ₹200 crore and a tax evasion case in which capital gains on the sale of land valued at ₹150 crore were artificially brought down to ₹2 crore. The authorities also employed Google Maps location history to identify people suspected of concealing unaccounted cash.

However, the absence of clear legal provisions has hindered officials from gaining access to vital evidence during investigations.

The finance minister emphasized that making digital access to data part of tax legislation is important to avoid loopholes from being exploited by tax evaders.

The proposed bill will see tax officials being able to legally scrutinize electronic records, such as crypto-related messages, to improve enforcement against financial offenses within the digital assets realm.