Sarbajeet K Sen Moneycontrol News
You would have completed your tax-saving investments for 2016-17 by now to meet the March 31 deadline and made necessary declaration to your employers. As these tax-related documents pile up over the years, one question that often crops up in taxpayers' mind is for how long they would be required to maintain these investment proofs.
Leading tax experts say you should maintain records of your tax documents for the past 6 years to be able to provide the same to the tax authorities in case they have some queries on your actions.
"It is advisable to properly file and maintain all tax-related documents based on which tax deductions or exemptions have been claimed. These must be kept safely for at least 6 years," Archit Gupta, Founder & CEO ClearTax.com, told Moneycontrol.
He said the documents that need to be maintained are proof related to Section 80C deductions, rental income, home loan interest deduction claimed and salary details such as Form 16 and pay slips.
Businesses must keep records such as journals, ledgers, cash book, bank account statements besides balance sheet and profit and loss account statements for at least 6 years, Gupta said.
Sudhir Kaushik, CFO and co-founder, Taxspanner.com explains the 6-year period that the documents are to be maintained in effect mean 8 years in common terms. "Tax records should be maintained for 6 years from the end of the relevant assessment year. This, for the common man works out to 8 years because April 1, 2011 transaction would pertain to FY 2011-12 and the assessment year would be 2012-13. If one need to keep the tax records for 6 years from end of the AY than it needs to be kept till March 31, 2019. Effectively, the total period works out from April 1, 2011 to March 31, 2019, or 8 years in total,” Kaushik explains.
He said in case an assessee is unable to provide the investment proof when called for by I-T officials, the claims may be rejected and penalties imposed. "In case of non-production of investment proof during verification/scrutiny the tax deduction/exemption claimed would be rejected and interest plus penalty would be payable with tax," he said.
For businesses, Cleartax’s Gupta says that under section 271A of the Income Tax Act, if a business fails to maintain books of accounts a penalty of Rs 25,000 may be levied. Also, under section 271AA where documents are not maintained for an international transaction or a specified domestic transaction, 2 percent of the value of such transaction may be levied as penalty.
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