ITR filing 2026: Should taxpayers keep physical records of digital transactions? Expert answers

In the past, many taxpayers used to maintain a file of their tax documents for several years. With the growing use of digital transactions and the e-filing of income-tax returns, many now wonder whether they should retain physical copies of tax documents or other records that may serve as proof of various transactions.

Here's what he suggested:

Taxpayers should maintain adequate supporting documents relating to income, deductions, exemptions, investments, taxes paid, and major financial transactions, even when such transactions are conducted digitally. Taxpayers should be able to substantiate the information reported in their returns in the event of processing queries, notices, assessment proceedings, or reassessment proceedings.

In the case of persons carrying on specified business/profession, Section 44AA of the Income-tax Act, 1961, requires the maintenance of books of account and other documents that enable the Assessing Officer to compute total income. Rule 6F further requires the prescribed books and documents to be retained for six years from the end of the relevant assessment year.

Documents that are part of any scrutiny or litigation proceedings may need to be retained for more than six years, that is, until the conclusion of such proceedings.

Rule 46 of the IT Rules, 2026, which deals with the maintenance of books of account under Section 62(1) of the Income-tax Act 2025, introduces a significant compliance requirement regarding the maintenance of records in electronic form.

Further, the provision mandates that books of account and specified documents maintained in electronic form must remain accessible in India at all times. In addition, backups of such electronic records must be stored on servers physically located in India and updated daily.