Income tax return documents generally include rent receipts, rental agreements, section 80C tax savings, and other related documents. As a regular income tax filer, you might be confused as to what should be done with these documents once the return has been filed or for how long you need to keep them. Well, here’s your answer.
The interesting thing to know here is that the Income Tax department doesn’t actually ask you to submit any document while filing your income tax return, as I-T returns are filed on a self-assessment basis. However, the I-T department has the right to send you a notice demanding to verify your documents in response to the claims made by you in your returns.
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It has been 40 years since I’ve filed income taxes. How long should I keep them?
A.R. Ramasubramaniam, who retired two decades ago and resides in a 500-square-foot apartment in Pune, has held onto his Income Tax Return papers and related documents for 40 years. Concerned about these documents deteriorating in his small living space, he expressed his dilemma: “Do I need to preserve these indefinitely?”
Ramasubramaniam inquired if there are regulations allowing the disposal of tax records that exceed a certain age.
Ramasubramaniam is not the only one grappling with the issue of retaining old income tax return (ITR) records. Just this month, Jag Mohan Soni, a resident of Delhi, shared his situation of keeping tax documents dating back to 2008-09. Soni believes he might be unnecessarily holding onto these old tax papers and seeks clarity on the legal requirements regarding them.
Honest taxpayers will go to whatever lengths to guarantee that their honesty is never questioned by authorities due to the extreme fear of income tax. There are undoubtedly many more senior taxpayers who have been clinging onto their ITR documents for years than Ramasubramaniam in Pune or Jag Mohan in Delhi. For clarification on the laws governing the retention of historical tax documents, FE Money spoke with a number of tax and legal specialists. Find out what they said by reading on:
Himanshu Sachdeva, Senior Associate at TAS Law
The length of time that a particular Taxpayer must retain their ITR documents is not stated in the Income Tax Act of 1961. However, Section 149 of the Income Tax Act stipulates a deadline for the Income Tax authorities to issue a notice under Section 148 of the Income Tax Act, which is 10 years from the filing ITR date to submit a pertinent record of the filing of the ITR within the specified deadline.
Nevertheless, if an individual earns income from foreign assets or has a financial stake in a foreign entity, they are obligated to preserve their ITR documents for a duration of 20 years.
Moreover, holding onto ITR records beyond the specified timeframe can prove advantageous in the event of future tax-related conflicts or assessments, as it serves as proof of your financial transactions and tax adherence. Therefore, it is advisable to keep your tax records well-organized and secure for an extended period.
Abhishek Nangia, Senior Associate, SKV Law Offices
There is no provision under the Income Tax Act 1961 as to how many years the ITR filers are required to maintain their older ITR records. But the income tax department in terms of section 149 of the Income Tax Act can furnish a notice for up to 10 years duration for the income escaping assessment. For instance, a person is required to retain the ITR documents for the subsequent ten years i.e. FY 2033-34 if he/she has filed the ITR in FY 2023-24.
In light of this, it is advised that ITR filers hold onto their ITR documents for at least 10 years, or until the Income Tax Department may issue a notice in accordance with Section 149 of the Income Tax Act.
Nikhil Varma, Managing Partner, MVAC Advocates & Consultants
ITR filers should save their previous ITR paperwork and accompanying financial records for up to 10 years following the conclusion of the assessment year. This procedure not only conforms with the law but also acts as a safety net in the event of audits, disagreements, or the demand to justify income, deductions, and tax payments.
Additionally, as tax authorities now accept digitally signed and filed returns, keeping digital copies of ITR files is becoming more and more crucial to ensure accessibility and simplicity of retrieval during prospective investigations.
Pallav Pradyumn Narang, Partner, CNK
Under the provisions of the Income Tax Act, of 1961, generally, the Income Tax Department can reopen an assessment up to 4 years after the end of the relevant assessment year if the undisclosed income is less than Rs 1 lakh. This period extends to 6 years if the concealed income exceeds Rs 1 lakh and up to 16 years in cases related to assets located outside India.
Typically, taxpayers are not required to retain documents beyond a 4-year period following the conclusion of the relevant assessment year. However, in practice, instances have arisen where the tax department has made incorrect claims for periods exceeding 10 years in the past. In such circumstances, this can lead to challenges in resolving tax-related disputes, potential penalties, or even demands for additional tax payments.
The recommended approach in such cases is to digitize the documents and store them as electronic files. Scanning and saving them as digital records eliminates the need for physical storage space and ensures you have a backup for unforeseen situations or future needs.
Major Key Points that a Taxpayer Should Know
- Individuals who file their Income Tax Returns (ITR) should hold on to their previous ITR records and associated financial paperwork for a period of 10 years starting from the conclusion of the assessment year.
- In the event that a person earns income from foreign assets or has a financial stake in a foreign entity, they are required to retain their ITR documents for a duration of 20 years.
- A tax notice may be issued to a taxpayer if they have failed to report their complete income in previous filings. The criteria for such a notice include:
- The Income Tax Department has the authority to revisit an assessment within a 4-year timeframe if the undisclosed income is less than Rs 1 lakh.
- If the concealed income exceeds Rs 1 lakh, the assessment may be revisited for up to 6 years.
- In situations involving income tied to assets located outside India, the assessment can be reopened for up to 16 years.
- If a taxpayer anticipates the possibility of encountering a tax-related dispute or assessment in the future, it is advisable to maintain their records for an extended duration.
- The most prudent approach is to digitize the documents and preserve soft copies of ITR records that might come under scrutiny in the future.
For how long should you keep the I-T return documents?
According to Taxmann’s DGM & Chartered Accountant Naveen Wadhwa, the Income Tax Act doesn’t have any rule regarding how long a taxpayer should keep the documents with him. However, section 149 of the Act describes the time limit for sending income tax notice to a taxpayer. Based on that, I-T return documents should be maintained for that period. According to section 149 of the I-T Act, the Income Tax department can send notice to a taxpayer within seven years from the last date of the respective financial year.
- That means, if you are filing an income tax return for FY 2022-23, you should keep the related documents until 2029-30.
- This time limit of seven years is applicable to all types of taxpayers, including salaried, self-employed and other professionals.
What if I’m paying Income Tax on foreign properties?
If you are paying an income tax on incomes made through your properties out of India, you need to maintain the related documents for a longer time period. According to Wadhwa, Tax Return documents related to incomes from foreign properties should be kept safe for at least 17 years from the last date of the respective financial year.
Read Also: Free Download Income Tax Return E-Filing Software
Yes, spouse’s income can be clubbed with yours provided the source of funds belongs to you. You may file ITR 2 but better go through various ITR forms and select the appropriate one after fulfilling eligibility. If your spouse’s income is more than yours, then you cannot avail clubbing u/s 64. You need not inform IT Dept. Inclusion of spouse income in your ITR is enough. However, if the source of funds was independently earned by your spouse due to her skills like earning as a teacher or as a professional and source of funds has not been provided by you, then spouse’s income cannot be clubbed with yours. Your spouse may require to separately file her own ITR, without clubbing.
If any tax payer, include his spouse income with his income under section 64 and pay tax accordingly. Than which itr form/ schedule to be filled by spouse? How he can inform ti income tax department that tax is paid of his spouse? Please clarify.