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How long should you keep your income tax related documents, records?

If you are a law abiding individual who files income tax returns (ITRs) diligently every year then sooner or later you will end up with a pile of old documents kept as supporting proof for these returns and ask the question: How long should one have to preserve these papers, documents, proofs? All documents such as rent receipts or rental agreement, section 80C tax saving documents etc. which prove the claims made by you in your tax-return are advised to be kept safely once you have filed your ITR for a particular financial year.

However, one must remember that the income tax department does not ask you to submit any documentary evidence to substantiate the claim made at the time of filing ITR. The ITR is filed on the basis of self-assessment but the income tax department has the right to ask you to prove the claims in the ITR by sending you a notice.

How long should you keep the documents? Nowhere does it say for how long you have to keep these documents. There is no provision in the Income Tax Act which suggests for how long the documents must be kept by the taxpayer. However, Section 149 of the Income Tax Act specifies the time limit for issuing an income tax notice to an individual which can be interpreted as the time period for which documents must be kept. As per Section 149, the income tax department has the powers to issue notice to taxpayers for 7 years from the end of the financial year. So, this would mean that if you have filed ITR for FY 2017-18, then you must keep the related documents with you till the end of FY 2024-25 (31 March, 2025).

The 7 year time period is applicable for various classes of taxpayers.

For those with income from foreign assets: If have any sort of income from foreign assets, then you will have to keep the ITR related documents for longer. For any individual having income relating to a foreign asset or having a financial interest in any foreign entity, then for this class of assessees documents must be kept for 17 years from the end of the relevant financial years.

Should you keep it beyond 7 or 10 years?

Yes, it is advisable to keep the documents for 7 years; however, this does not mean that once the specified period is over, you can throw away the required documents. According to the amendment made in Budget 2017, applicable with effect from AY 2017-18 (April 1, 2017), income tax officers can now ask details up to 10-year-old cases that involves large amounts of escaped income.

But the income tax department cannot ask tax-related details from just about anyone; it is meant for certain exceptional cases. Income tax department does have the power to ask details of old cases up to 10 years, however, this comes under exception where the department has proofs against you and this can be done in the search cases only.

If you are filing ITR or have filed ITR for a deceased member of your family, remember in that case, too, you have to keep the documents for either 7 or 17 years from the end of the financial year, depending on the type of income the taxpayer had.

Maintenance of Books of Accounts under Income Tax Act, GST Act & Companies Act

Books of accounts including vouchers and receipts are required to be maintained under different statutory laws – Income Tax Act, Companies Act 2013 and GST Act. Books to be maintained, retention period and compulsion requirements are different under all the 3 laws.

Under Income Tax Act

If the sale/turnover/gross receipts from the business or profession is more than Rs. 25,00,000 or the income from business or profession is more than Rs. 2,50,000 in any of the 3 preceding years, then books of accounts will be compulsorily maintained.

Following professions are covered under this provision –

Legal, Medical, Engineering, Architectural, Accountancy, Technical consultancy, Interior decoration, Authorised Representative (one who charges fees for representing someone before tribunal or any authority), Film artist (producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer and costume designers), Company secretary

Thus, if the above-mentioned professions have an income of more than Rs. 2, 50,000 in any of the 3 preceding years, they need to maintain books of accounts. In case of a new profession also, if the income is expected to be more than Rs. 2, 50,000, the professionals should maintain books.

Books of accounts as per Rule 6F

Ø Cash Book

Ø Journal

Ø Ledgers

Ø Copies of bills or receipts

Ø Daily cash register with details of patients, services rendered, fees received and date of receipt (persons carrying on medical profession)

Ø Details of stock of drugs, medicines, and other consumables used (persons carrying on medical profession)

If the income isn’t more than Rs. 2, 50,000 in any of the 3 preceding years or not expected to be more than Rs. 2, 50,000 in case of a new profession, then also books should be maintained. However, books, in this case, haven’t been specified – so any books can be maintained but it should be such that ATO can calculate the income.

For how long should the books be maintained?

Books should be maintained for a period of 7 years from the end of the relevant financial year.

Under Companies Act

Every company has to maintain books of accounts, at the registered office or any office that board of directors may decide. If the company is maintaining books at an office other than the registered office, it has to intimate the same to ROC. The company can maintain the accounts electronically also.

For how long should the books be maintained?

Books should be maintained for a period of 8 years from the end of the relevant financial year.

Books of accounts to be maintained

Ø Cash flow statement

Ø Records of sales and purchases,

Ø Records of assets and liabilities

Ø Items of cost

Ø Deeds, vouchers, writing, documents, minutes, and registers whether in physical or electronic mode

Under GST Act

Every registered person has to maintain GST records at the principal place of business.

Records to be maintained

ü Production or manufacture of goods

ü Inward and outward supply of goods or services or both

ü Stock of goods

ü Input tax credit availed

ü Output tax payable and paid and

ü Other particulars as may be prescribed

For how long should the records be maintained?

Books and records should be maintained for 6 years from the last date of filing of the annual return (31st December) for that year. This means effectively for 7 years after the end of Financial Year.

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