Anjan Basu has dedicated an entire cabinet to documents. He diligently files each and every financial document carefully, and by the year for the entire family. The public sector bank employee took to documentation after he had a harrowing experience with the tax authorities five years earlier.
When he went to the tax department after a scrutiny letter, he was asked to furnish Form 16 papers for the past eight years. After running from pillar to post, when he could not find some papers, he was questioned and cross-questioned for an entire month. Finally, when the tax department closed the case with a terse ‘please maintain all documents henceforth’, he swore to himself that he would maintain all papers.
It’s not just documents like Form 16 and income-tax returns. Under the new guidelines for foreign assets, holders, trustees and nominees have to maintain documents for 16 years. Even if you don’t hold it anymore, you can still be pulled up for it.
Similarly, documents with details of any kind of capital assets (shares, property, gold and so on) are very important. Says Vaibhav Sankla, director of H&R Block, “If you had bought a property 20 years back and plan to sell it or have sold it this year, you should have details of the property, and, if possible, purchase agreement as it will come handy. You never know when you will be asked to produce the documents. The onus is entirely on you to support your case.”
Of course, there are practical difficulties of maintaining documents physically because over time, whether you keep these in a closet or locker, there will be a problem. Much like physical shares that would get destroyed or numbers erased due to decay. Demat of shares has made life much easier for investors. For tax payers as well, such a solution is required.
Digitisation of documents could be a solution. A few companies have started operations in India to convert documents in the digital format through scanning. All you need is a username and password that will help you access them whenever you wish to do so. The cost is Rs 1,200-2,000. Banks like ICICI Bank have started an e-locker – a virtual online locker – that provides online storage facility for scanned documents. With the income-tax department moving aggressively towards e-filing – 16.4 million used the route in 2011-12 – there is a case for accepting documents in digitised format as well. From this year onwards, anyone with income of over Rs 10 lakh has to file e-returns. However, there is a discrepancy. “At present, even if you file e-returns, you have to send the physical documents through registered post to the Bangalore office. Many times, they are misplaced or do not reach them. As a result, the department classifies you under the category of persons who have not filed returns,” said tax experts. Allowing digitised documents will help lessen the burden for both tax payers and the department. But even before the department starts doing so, there is a strong case that you should start maintaining financial documents in the format. A month’s grilling, like Basu went through, is not worth it.
