The Finance Ministry said it does tap telephones in exceptional cases to unearth tax evasion but denied eavesdropping on routine corporate calls.
"Phone interception is done only in very exceptional and the rarest of cases after obtaining due authorisation from the appropriate authority," a Finance Ministry statement said.
It also said telephone interception was not being used for routinely tapping corporate conversations or keeping a tab on top bracket taxpayers.
The statement was issued following certain media reports, which said the Investigation Wing of Income Tax Department was tapping corporate conversations over the past eight months.
The department was reportedly tapping phone conversations to track down cases of evasion of Banking Cash Transaction Tax and where large banking transactions were being carried out to facilitate terrorist organisations.