- Once you file the ITR, you can receive a ‘scrutiny notice’ for assessment under section 143 (2) of the I-T Act. Such a notice can be received within 6 months of the end of the assessment year
- Maintaining tax records for past several years can help in calculating the applicable tax for assets purchased a long time ago such as shares or real estate.
In today’s digital age, income tax records can be maintained at little or no expense for long periods of time in a digital format. However, it is important to know the time limits for different types of income tax assessments while you are storing and filing away old documents. An income tax return (ITR) for any financial year for most individuals (other than those who need to be audited) needs to be filed by 31 July of the following financial year. Those individuals who are required to be audited can file their returns by 30 September. For example, for the financial year (FY) 2019-20 (which ends on 31 March 2020), the deadline for filing ITR is 31 July 2020.
Once you file the return, you can receive a ‘scrutiny notice’ for assessment under section 143 (2) of the Income-tax Act, 1961. Such a notice can be received within six months of the end of the assessment year. An assessment year is the year that follows a financial year. For example, for FY18-19, a scrutiny notice can be served before 30 September 2020. Second, you can receive a notice for re-assessment under section 147 of the Act. Such a notice can be served within four years of the end of the assessment year if the income that is alleged to have escaped assessment is less than ₹1 lakh. If instead, such income is more than ₹1 lakh, the notice can be served within six years of the end of the assessment year. This effectively means seven years from the end of the financial year in which you have earned the income in question and hence, seven years is considered the time limit for maintaining your records in popular discourse. However, if you have foreign assets or income, a notice for re-assessment can be served up to 16 years from the end of the assessment year in question. In cases where tangible evidence is found during a search or seizure operation revealing that income exceeding ₹50 lakh has escaped assessment, then assessment can be framed between the seventh and tenth assessment year.
Although seven years is a good rule-of-thumb for maintaining tax records, you should hang on to the past records in digital format for as long as you can. This can help in calculating the applicable tax for assets purchased a long time ago such as shares or real estate. With the introduction of long term capital gains tax (LTCG) on stocks and mutual funds, you will need these records. Recently social media has been abuzz with reports of demand notices from old assessments being sent. If you feel that a notice has been unfairly sent to you, can you file a complaint with the e-Nivaran System of the income tax department or with the centralised public grievance redress and monitoring system (CPGRAMS) which is applicable to all types of public grievances, tax-related or otherwise
Courtesy: Live Mint