How Long Should One Keep ITR Documents?

What is an Income Tax Return?

An Income Tax Return is a form that the taxpayers file to declare their annual income and tax liability to the Income Tax Department, as required by the Income Tax Act 1961. Whether you are an individual, business, or HUF, you need to file an ITR every year. This form is applicable for a period of 1 year, starting on 1st April and ending on 31st March.

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Who Needs to File an ITR?

If you fall under any of the below-mentioned points, it is mandatory for you to file an ITR -

• Any individual who is less than 60 years old and has an annual income exceeding the basic exemption limit must file an ITR every year.
• Any company registered with the government with an annual income must file an ITR, even if it does not earn profit during the year.
• Any individual who wants to claim a refund of any excess tax paid has to file an ITR.
• Any individual who holds any asset in a foreign country or has a foreign source of income is required to file an ITR.
• Any company registered outside India but getting treaty benefits on the transactions made within India is required to file an ITR.
• All NRIs with income exceeding the basic exemption limit must file an annual ITR.

Even though it is not mandatory to file an ITR for everyone, it is always advisable to file an ITR as there are multiple benefits of filing an ITR.

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Should I Retain my ITR Documents, and Why?

Even though the Income Tax Department does not compulsorily ask taxpayers to retain their ITR documents, it is advised to retain them for a certain period of time. Here’s why -

• If you commit a mistake while filing your ITR, you can refer to the ITR documents like trade statements, Form 16s, dividend, and interest and file a revised ITR to correct the mistake.
• If you are eligible to carry forward your losses to the next years or claim an exemption of any business expenses in later years, you have to retain the ITR documents.
• If you are someone who has to get a tax audit done, you need to retail ITR documents and return statements for 8 years for individuals, 8 years for businesses, and 16 years for people with income from foreign countries or assets situated in foreign countries.

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What are the ITR Documents that Should be Retained?

Now that you know that you must retain your ITR documents for some time after filing the ITR, the next question is, what documents should you retain? There are various supporting documents that are used to gather the information provided in the ITR filed, and it is not possible to retain all of it. Therefore, here’s a list of a few important documents that you must keep secure even after filing your ITR.

• Form-16 - Form 16 consists of the employee’s salary details and the details about the TDS deducted. While part A consists of the details of the TDS deducted by the employer and the TAN and PAN of the employer, part B consists of other calculations like salary, exemptions, allowances, and perquisites.
• Form 16A, Form 16B, Form 16C - Form - 16A consists of the details of the TDS on payments like interest on FDs and RDs. Form 16B consists of the details of TDS deducted on the amount paid on the sale of a property. Form 16C consists of the TDS deducted on rent @5%.
• Annual Bank Statements - Keep the ITR documents like annual bank statements and statements of shareholding for at least 7 years. You must also keep records of rent receipts, education loan details, HRA details, and disability allowance proofs, as they help you claim the benefits under the Income Tax Act.
• Statements of Capital Gains - You should also keep your statements of capital gains for a minimum period of 7 years if you are a business. The statement should include the details like purchase cost, cost of making, and sale price.
• Foreign Income - If you have any assets outside India or earn income from a foreign country, you have to keep ITR documents for 17 years. You might get a notice frm the tax department at any time to furnish the tax certificates from different countries.
• Books of Accounts - An individual must keep their books of accounts safe and secure for a minimum of 8 years. However, if the individual files their ITR under the Presumptive Taxation Scheme u/s 44, he/she has to retain it for a period of 7 years.
• A Copy of the ITR - You must also keep a copy of the ITR documents filed to make sure that you are able to furnish the details on receiving a notice.
• Housing loan interest certificate
• FD interest certificate

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How Long Should ITR Documents Be Retained?

As per the Income Tax Act, there is no such provision as to how long one should retain the ITR documents. However, section 149 of the Income Tax Act specifies the time limit during which the Income Tax Department can send a notice to the taxpayers. It is ideal for you to retain the ITR documents for as long as the IT department is allowed to send a notice.

According to section 149 of the Income Tax Law, the Income Tax Department is legally allowed to send the taxpayers a notice in the next 8 years from the date of filing the ITR. For example, if you have filed your ITR in F.Y. 2022-2023, then you must retain the ITR documents for the next 8 years, i.e., 2030- 2031. This provision is applicable to all types of taxpayers, including businessmen, individuals, and HUF.

However, if you are an individual who earns any kind of income from foreign assets or holds a financial interest in any foreign organization, you must keep the ITR documents for a period of 16 years from the date of filing the ITR.

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