A fool-proof guide to Financial Document Preservation: Keep or Kill?

The Keep or Kill Dilemma:

To keep or to destroy? This is a question which all of us face when we sit down with unsorted papers, bills, credit card statements, insurance premium receipts and a plethora of other papers. Deciding which papers need to be kept, and which ones are for immediate disposal, can prove to be a dilemma.

Problems can be further compounded if the periodicity of retaining a document is not known. How long to keep the bill and/or the warranty card for the washing machine that was bought last month? What about the LIC premium receipts?

So it is important to know which documents are to be retained and if so, for how long . Here is a comprehensive review of the documents and the period for which they need to be kept. We can divide the type of documents into three parts:

1. Documents to be retained lifelong
2. Documents to be retained for a particular period
3. Documents whose recent copies only need to be retained

Documents to be retained lifelong

There are certain documents which need to be kept in safe custody lifelong and even beyond. Birth certificate is the first and most important certificate when alive, similarly after death, the death certificate is great significance. This has to be retained forever by relatives and heirs.

Property deeds, share and bonds not held in dematerialized form, will and trusts, are some of the documents which are to be retained perennially. Identity documents like Voter Identity Cards, Adhaar Card, PAN Card, Passport, Driving Licence (as per its validity date), caste certificates, and marriage certificates need to be retained as they are necessary for all eventualities where proof of identity need to be furnished.

All these documents must be kept in a place which is known to at least one or two other person as a precautionary measure.

Here is a list of must-keep-forever documents:

1. Birth Certificate
2. Death Certificate
3. Adhaar Card
4. Voter Identity Card
5. PAN card
6. Passport
7. Driving Licence
8. Marriage Certificate / Divorce Decree
9. Caste Certificates
10. Property Deeds
11. Wills
12. Bonds and Share Certificates
13. Pension Plan Certificates

Documents to be retained for a particular period:

There are some documents which have to be kept till the time they are relevant. After that, they may be consigned to the shredder. It is not always necessary to store all these documents in paper form and fill up space, scanning and retaining it electronically is sufficient, however in some cases retention of original hard copy is mandatory.

LIC and insurance policy certificates are to be retained till the completion of term. The same applies to Fixed and Term Deposit certificates. Income Tax Returns, Form 16s’ and relevant income tax related papers are to be retained for the relevant period of time, mostly up to seven years.

This is a list of documents which need to be kept for a particular period:

1. Tax returns and records ( up to 7 years)
2. Warranty documents (till the validity of the warranty)
3. Purchase bill of items under warranty (till the validity of the warranty)
4. Insurance policy documents (till the policy is in force)
5. Fixed Deposit and Term Deposit Receipts (till the validity of the scheme)
6. Any money deposit receipt (till the time it is reflected in the statement)

Documents whose recent copies only need to be retained

Besides the above, there are certain documents for which it is necessary to only keep the last updated statement. From Provident Fund Balance Certificates, home loan interest certificates to any such bill or invoice which may be necessary to establish an immediate claim. This could be an intermediary receipt which is subsequently replaced with a final receipt. In certain cases Income Tax exemptions are granted for a specific period (usually a year), for some individuals residing in a specific area. Such certificates need to be retained for the period it is valid.

Here are the documents for which only the last or latest copy is relevant:

1. PF balance certificate
2. Loan Balance certificate
3. Income Tax exemption certificates
4. Accrued interest certificates for housing loans
5. Any intermediary or temporary receipt which will be subsequently replaced by a final one

Document Storage

Document storage procedure and practice is as important as knowing about document retention periodicity. Since all these documents are of vital importance, either lifelong or for relevant period, their safe keeping is an absolute necessity.

Lockers and safes are the ideal place for storing such documents. Lockers in the banks vaults are safe, else individual lockers with number locks are desirable. Electronic documents may be kept encrypted through 256-bit Secure Socket Layer (SSL) encryption technology.

Conclusion

It is likely that some documents are irreplaceable, meaning that once lost it cannot be regenerated and for some others it might cost substantial time, effort and money to get a duplicate issued. Hence the importance of properly maintaining these documents need not be over emphasised. It is in the best interests of the individual to properly preserve the documents based on its periodicity and relevance.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in