How long to keep income tax records
Retention questions are usually asked as "how long", and that is the less useful half of the question. The more useful half is which documents stop being relevant when the period expires and which never do.
The working rule
Retain records long enough to defend the return through any assessment, audit, appeal or refund proceeding that could still be opened. In practice that is longer than most default policies assume, for three reasons:
- Proceedings can be opened after the return year has closed, and the window is not the same in every situation.
- An appeal extends the relevant period well beyond the original assessment.
- A refund claim keeps the underlying year live until it is settled.
What to keep, and for how long
| Record | Retain for | Why longer than you expect |
|---|---|---|
| Income tax return, computation and acknowledgement | Six years from the end of the tax year | Assessment can be amended within the statutory window |
| Sales tax records, invoices and returns | Six years | Sales Tax Act 1990 record requirement |
| Withholding certificates received | Six years | They evidence credits already claimed |
| Bank statements | Six years | They are the trail behind the wealth statement |
| Property purchase deed, duty receipts, 236K challan | Until six years after the property is SOLD | They are the cost base for the eventual capital gain |
| Improvement invoices on any asset | Same | Deductible only if evidenced at sale |
| Company incorporation and statutory records | Life of the company | Required on any diligence, sale or dispute |
| Open audit, refund or appeal files | Until resolved, then six years | Routine destruction can destroy live evidence |
Rows five and six are the ones a six-year rule gets wrong. A property held for twenty years needs its 2009 purchase documents in 2029 — the retention clock on those runs from the sale, not from the purchase. Anyone applying a flat six-year policy will have destroyed the cost base of their largest asset long before they need it, and the difference between a documented and an undocumented cost base is the whole improvement spend plus the duty and advance tax paid on acquisition.
The documents that outlive the retention period
These are governed by the life of the asset, not by a calendar rule:
| Document | Why it survives |
|---|---|
| Property acquisition deed and payment evidence | Establishes cost basis for a capital gain computed whenever you eventually sell — potentially decades later |
| Improvement and construction cost records | Adds to cost basis; unrecorded improvement is value you cannot claim |
| Section 236K challan from purchase | Part of the acquisition file for the same computation |
| Share and investment acquisition records | Cost basis on disposal |
| Succession and inheritance documents | Establishes how an inherited asset came to you and on what basis |
| Evidence supporting an opening wealth position | Every subsequent year reconciles back to it |
| Loan agreements for outstanding borrowing | The liability persists in your wealth statement |
The property file is the one that matters most in practice. A gain computed on a sale in 2040 depends on a deed from 2015, and reconstructing an acquisition cost from a developer that has changed hands is close to impossible — see property capital gains.
A notice landed in your IRIS inbox or by post, there is a date on it, and you do not know what it is asking for.
What each tax year file should contain
- The return as submitted, the computation, the wealth statement and the acknowledgement.
- Salary and tax deduction certificates from every employer.
- Withholding certificates by section, and the challans.
- Bank statements for every account for the full year, including dormant ones.
- Business accounts and supporting ledgers where applicable.
- Property, vehicle and investment documents for anything acquired or disposed of in the year.
- Gift, inheritance and remittance evidence.
- The wealth bridge working showing how opening became closing.
Filed by tax year rather than by document type. A request about one year should not require reassembling three years of folders — the document checklist.
Form and retrievability
- Electronic is generally fine and often better, provided records are readable, complete and retain their audit trail.
- Keep the accounting data file, not just PDF reports generated from it.
- Back up off the primary system and test a restore. An untested backup is a hope.
- Migrate or retain access when you change systems. This is the most common cause of a lost period.
- Retain originals where a document has legal significance beyond tax — deeds, share certificates, succession documents.
- Download bank statements quarterly, because online access windows close.
Writing a retention policy that works
A policy that exists only in someone head is not a policy, and its absence is what leads to inconsistent destruction. A workable one fits on a page:
- State the default retention period, keyed to the longest applicable across income tax, sales tax, provincial regimes and company law — one period for everything is simpler than five and errs the right way.
- List the permanent categories that are never destroyed on a calendar basis: acquisition documents for assets still held, succession documents, and anything supporting an opening wealth position.
- Name who authorises destruction, so it cannot happen by default when someone clears a cupboard or a drive.
- State the suspension rule explicitly: no destruction anywhere in the business while any proceeding is open for any year.
- Record what was destroyed and when, which is what lets you answer honestly if a notice arrives for a period you no longer hold.
That last item matters more than it looks. "Destroyed in accordance with our retention policy on this date" is a defensible answer. "We do not know what happened to it" is not.
The two transitions that lose records
- Changing accountant. Obtain the accounting data file, the working papers behind each return, and confirmation of what is outstanding — before the relationship ends rather than after.
- Changing software. Either migrate historic data forward usably or keep the old system accessible. A migration bringing only opening balances leaves every prior period unsupported at transaction level.
After either, run a verification: pick three filed returns from different years and confirm you can still trace each from the return figure to the ledger to a source document. If you cannot, the handover is incomplete — bookkeeping for tax compliance.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
Can I destroy records once the standard period has passed?
Only if nothing is open and no document has a longer working life. Suspend destruction entirely while any assessment, audit, appeal or refund proceeding is live, for any year. And separate out the documents that outlive the period on their own terms — acquisition deeds, cost records for assets you still hold, and anything establishing an opening wealth position.
Which documents should I never destroy?
Anything establishing the cost of an asset you still own. A property deed from 2015 is the cost basis for a capital gain computed whenever you eventually sell, which could be decades away. The same applies to share acquisition records, improvement costs, and the funding trail behind an opening wealth position.
Is a scanned copy enough, or do I need originals?
Readable electronic copies with their audit trail are generally workable and often more useful than paper, provided they are complete and retrievable. Retain originals where a document has legal significance beyond tax — a property deed, a share certificate, a succession document — because their value is not confined to a tax file.
My records are on a system I no longer use. Does that count as keeping them?
Not really. A record you cannot retrieve is not a record for practical purposes. Either migrate historic data forward in a usable form when you change systems, or retain access to the old one. A system change is the most common cause of a genuinely lost period, ahead of deliberate destruction.
What if a notice arrives for a year whose records I destroyed properly?
Say so, and produce what alternative evidence exists — bank records, third-party confirmations, filed returns and computations. An honest account of records destroyed on a documented policy, with substitutes offered, is a defensible position. Reconstructing documents to fill the gap is not, and converts a records problem into something far more serious.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
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