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QUESTIONS & ANSWERS
How long should records be maintained?
I have been filing my income-tax returns over 50 years. In spite of my best efforts, I have not got a clear answer to the question as to the number of years for which one has to keep documents and records as may be required for any reassessments by the income-tax authorities. I have, on my own, been keeping records for the previous 12 years. Could you enlighten me on this? My income is only from pension and interest from NSCs and fixed deposits.
Ordinarily, a person is expected to have documents to prove his return filed in case his return is taken up for verification by issue of notice under Sec. 143(2) within six months from the financial year in which 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, so that it follows that records relating to three immediately preceding years may be required. Even so, notice under Sec. 148 is ordinarily possible for four preceding years even if there is no fault on the taxpayer, if there is reason to believe under-statement of income. But if the omission had occurred on account of any “failure on the part of the assessee” either to make a return or to disclose fully and truly all material facts in the return for the relevant assessment year, notice can be issued beyond four years time limit, but not exceeding six years. Hence retention of records for six years should ordinarily be sufficient.
Even so, one can weed out such papers, which are not material for proving the income. In the case of assessees, whose income does not consist of business or profession, records for four years and for years for which appeal or refund is pending alone may be necessary to be retained for income tax purposes. A taxpayer may, no doubt, like to keep some basic records for a longer period for his own personal purposes.
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