Why you should keep ITR-related papers

The due date for filing income tax return (ITR) for assessment year (AY) 2018-19 has been extended by a month to 31 August. While some of you would have already filed your ITR, those who haven’t should file it at the earliest. Though you do no need to attach supporting documents when filing your ITR online, you should keep all the documents you used to file your returns as you may need to validate the details in case you get an income tax notice.

But how long should you keep the documents with you?

Documents to keep

Documents that you need to maintain will depend on your profile as a taxpayer, source and destination of income, nature of financial transactions and so on.

A salaried individual should keep documents like Form 16 and proofs of expenses and investment claimed as deduction, such as rent receipts for claiming house rent allowance (HRA) deduction, proofs of investments made like life and health insurance payment receipts, repayment certificate of a housing loan, children fees’ receipt and so on.

Time period

There are no set guidelines on how long you should maintain the documents, but there are time limits till which the tax department can issue notices and ask for proofs and documents.

As per the Income Tax Act, 1961, the time limit till which notices can be issued depends on the amount of income not declared. If the department assesses that the amount of income which escaped assessment is up to ₹ 1 lakh, then a notice can be issued only till four years from the end of relevant AY. If the amount is estimated to be more than ₹ 1 lakh, then a notice can be issued will six years from the end of the relevant AY.

So, for returns filed for the current AY, you should ideally maintain related documents for the next six AYs, or till 31 March 2025.

However, if any foreign income or assets escape assessment, then the notice can be issued till 16 years from the end of the relevant AY. If you have such income or assets, you should keep your documents for 16 years.

Remember the onus to substantiate the ITR lies with the taxpayer. If you fail to furnish supporting documents for your claims, the income tax department can levy tax, interest, penalty and, in case of gross neglect, may even initiate prosecution.