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How long should I keep my income tax records? |
TAX TALK-02.11.2015-THE HITAVADA
TAX TALK
CA. NARESH JAKHOTIA
Chartered Accountant
How long should I keep my income tax records?
Query 1]
I am a senior citizen and have been filing IT returns regularly for many years. Presently it is by way of e return. My enquiry is about the period we are supposed to retain old returns. Once the return is filed, we do have many connected papers in our file. For how many years we should keep these records with us. My return is simple being pensioner (Pension + Interest on deposits). Kindly guide. [B.L. Hedaoo- blhedaoo@hotmail.com]
Opinion:
A universally accepted human law-
“The minute you throw something out that you haven’t looked at or touched for decades, you will need it desperately”.
Not only tax, but records are equally dear to the Income Tax department. A very common & frequently asked question, how long should I keep my old records? This not only haunts the individual salaried taxpayers but also businessmen & accountants. Different laws (like Companies Act, Labour laws, Income tax Act, Excise & Customs Act, Sales tax) have different time frame for retention of records.
Under the Income Tax Act-1961, the requirements for retention of earlier year documents & records could be ascertained from various sections which require production or submission of such record before the income tax authorities. The same are as under:
1. For all Taxpayers:
i] A person may normally be required to justify his return in case the return is selected for scrutiny assessment pursuant to notice u/s 143(2). Selection of such cases can be done within six months from the end of the financial year in which the return is filed. Proviso (b) to Sec. 142(1) bars any requisition for production of any accounts or records relating to a period more than three years prior to the previous year, which means that that records relating to three immediately preceding years may be required in all the cases selected for scrutiny assessment.
ii] Further, reassessment under Sec. 148 could be initiated for four preceding years if there is “Reason to Believe” that there is an under-statement of income. But the period of four years could be extended to six years;
(a) if the income chargeable to tax which has escaped assessment is likely to be Rs. 1 Lacs or more.
(b) if the income escaping assessment is in relation to any assets (including financial interest in any entity) located outside India.
In short, in the case of a person whose income does not consist of “Income from business or profession”, it would be sufficient if the records for four years and for years for which appeal or refund is pending are retained by the taxpayers. A taxpayer may keep some other basic records for a longer period for his own personal purposes.
iii] In case, the search (i.e., income tax raids) has been carried out on the assessee, the records of 6 preceding assessment years may also be required.
2. For taxpayer having “Income from Business/ Profession”:
In addition to what is discussed in Para (1) above, taxpayers engaged in business/profession are required to keep the books of accounts and other documents for at least 6 years from the end of relevant assessment year [Rule 6F(5) of the Income Tax Rules]. For example, for the FY 2014-15 (i.e., AY 2015-16), the books of accounts would be required to be kept till 31.03.2022. Considering financial year as a yardstick, the books of accounts & records are required to be retained for subsequent seven financial years. However there are three exceptions, as under:
(a) Where the assessee has made an appeal against any assessment order of any year, then the books of accounts of such year should be preserved until the final decision of such appeal.
(2) Where the assessment in relation to any Year has been reopened u/s 147 within time u/s 149, then in such case all the books of account and documents shall continue to be kept till the assessment so reopened has been completed.
(3) Where the person who has entered in to an International (Transfer Pricing documents) or in a specified domestic transaction as covered by Rule 10D of the Income Tax Rules-1962, then assessee is required to maintain the records for a period of 8 years from the end of the relevant assessment year.
To simplify, except in certain cases sighted above, it would be sufficient if the records are kept for 7 successive financial years. However, one quick word of warning: even if records aren’t needed for tax reasons, you may need them for other reasons. Make sure that there is no old undisputed outstanding demand which may require documents for its rectification/ corrections.
Query 2]
Please guide as to how to get new PAN card in case previous one is lost. Please quote prescribed Form which can be down load from site and further procedure. [S. S. Budruk, Washim-sahebbudruk@rediffmail.com]
Opinion:
You can get the new PAN card with originally allotted number & data thereon. For this, you have to make an application in “Request for New PAN Card or/and Changes or Correction in PAN data”. The form can be downloaded from the websites of UTI Technology Services Ltd (UTITSL), National Securities Depository Ltd (NSDL), or the I-T department [www.utitsl.co.in, www.tin-nsdl.com orwww.incometaxindia.gov.in]. The form can be submitted at TIN facilitation centers of UTITSL and NSDL, the addresses of which are available in the above mentioned website.
[The author is a practicing Chartered Accountant from Nagpur.
Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at
nareshjakhotia@ssrpn.com].
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