For any taxpayer, filing income tax returns is a crucial responsibility. But it is equally important to retain one’s income tax records for future inquiries from the tax department. So, if you stumble upon your old tax documents dating back to several years, don’t just discard them yet, and for good reason.
Incidentally, a social media user recently claimed that she got a demand from the income tax department last month for an assessment dating back 16 years, AY 2007-2008. The user also asked on X (previously Twitter) that she found a stash of tax papers spanning from 1994-95 to 1997-98, and sought guidance from income tax department on whether these aged records can be destroyed.
This has prompted a vital question, for “how long should the income tax records have to be kept?”
Many individuals, who have tax papers dating back to the mid-90s, may also have the same question. So, what should one do?
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According to Jessty Thomas, a chartered accountant, the income tax department can issue notices for tax records up to 10 years from the date of filing.
“The income tax department can send notices for incomes escaping assessments within this 10-year timeframe. So, it’s imperative to retain documents, such as book of accounts, vouchers, ledgers, and supporting documents for purchases and expenses. In the digital age, maintaining soft copies is sufficient, as you can take printouts anytime from accounting software, such like Tally,” says Thomas.
He says while the tax collection process has been digitalised, all the supporting documents are not uploaded and they have to be retained. He adds that he hasn’t heard of an instance where any person has been asked for tax records beyond 10 years, unless in some special circumstances.
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“In this particular case, the assessee was asked for documents from 2007-2008 which is 16 years back. He or she can say that she doesn’t have it as it has been more than 10 years. However, the context matters on this 10-year maximum period. If there’s an ongoing notice from the income tax department for a specific assessment year, you must provide the required documents regardless of the 10-year limit. Likewise, if you engaged in transactions with parties who are now being subjected to tax record checks for a given year, your tax records can also be scrutinised. Or, if this person had purchased a property in 2007-2008, the records have to be kept until the property was sold. Any bank statement can be requested anytime. You can always request for a bank statement, especially if the value exceeds Rs 50 lakh.”
In short, it’s important that you maintain your documents for at least 10 years, and for longer durations in special cases.