New I-T Manual: Income Tax Department will take action against these people, issued a new circular

New I-T Manual: The revised Tax Search and Seizure Manual of 2025 is no longer limited to just vaults – cloud wallets, mobile apps and NFTs will now be investigated. Tax officials have been given a free hand to access look-out circulars, credit reports, and crypto data.

New I-T Manual: The tax department has revised its Search and Seizures Manual 2025 to curb tax evasion. It gives new and sweeping powers to officers. This includes issuing look-out circulars (LOC) against serious tax evaders and suspects, seeking data from foreign crypto exchanges, and checking the credit history of individuals.

This manual has been prepared with amendments to the Finance Act 2025 and is designed to deal with cryptocurrencies, virtual digital assets (VDAs) like NFTs, and modern methods of hiding income.

Greater use of LOC against high-value tax evaders

The new manual empowers income tax officers to issue LOC to prevent taxpayers under investigation from fleeing the country. LOC can be issued when:

  • The taxpayer should not respond to repeated summons or notices, especially in big cases.
  • There should be credible information that the taxpayer may flee to avoid investigation.

The implementation of the LOC will require the approval of a senior level officer, such as a Principal Director or Director General. It will be implemented at exit points such as airports through the Ministry of Home Affairs (MHA) and the Bureau of Immigration (BOI).

Power to seek data from foreign crypto platforms and seize digital assets

The revised manual has made changes to Section 132(1) of the Income Tax Act, 1961, now including VDA among the goods subject to search and seizure like cash, jewellery and gold.

Officers can now search and seize:

  • Crypto wallets, NFTs, private keys, recovery phrases.
  • USB drives, mobile phones, laptops, apps, and VDAs stored on cloud platforms

Officials can issue summons to Indian and foreign crypto exchanges and seek user data and transaction information. Blockchain analysis equipment will track the flow of assets in wallets and exchanges. If a tax person is found to have undeclared digital assets worth more than Rs 10 lakh, further investigation or search may begin.

Credit score and loan activities now under scrutiny

For the first time, the manual allows officials to take credit information from credit bureaus like CIBIL and Experian. This will make it easier to create a financial profile of the tax person and detect undeclared income.

Examples:

  • High credit card usage or frequent loan availment despite low declared income.
  • Defaults in EMIs or large loan outstandings without tax disclosure.
  • This capability will help in detecting cases of tax evasion and suspicious assets.

Data analytics and detection of evasion through financial behaviour

The department has made technology and data analytics the mainstay of investigations. Under the new rules, officers will:

  • Will use tools to detect crypto transactions.
  • Will analyze financial behavior from credit and loan data.
  • Will detect the difference between income and lifestyle from third-party data.
  • Senior officials say that this manual can prove to be a strategic change in India’s tax policy. It will keep pace with the rapidly changing financial landscape.

A senior source told CNBC-TV18, “Today wealth is not just in the vault or property. It is in cloud wallets, mobile apps and digital contracts. This manual gives legal and technical support to tax officials against those who cheat the system.”

Legal support and procedural protection

Along with new rights, the manual ensures that steps like LOC or digital asset seizure are with senior level approval and clear documentation, so that there is no misuse.

This revised manual comprehensively upgrades the tax department’s enforcement system, equipping officials with legal clarity, digital forensics and real-time financial information to deal with the challenges of new-age tax evasion.

Sandeep Bhalla, Partner, Dhruva Advisors, said, “The revised Income Tax Search and Seizures Manual addresses the risks of modern tax evasion. It is based on the Finance Act 2025, which makes several significant amendments to the search and seizure provisions of the Income Tax Act, 1961, particularly to address the challenges of VDAs such as cryptocurrencies and NFTs. Section 132(1) explicitly includes VDAs in the definition of ‘books of accounts, documents, money, gold, jewellery or other valuables’. With these changes, the department has released the revised Manual of 2025, which empowers investigation and enforcement units to detect, prevent and disrupt modern tax evasion mechanisms.”

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