What books of account have been prescribed to be maintained by a person carrying on business/profession under the Income-tax Act?

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What books of account have been prescribed to be maintained by a person carrying on business/profession under the Income-tax Act?

 

The Income-tax Act does not prescribe any specific books of account for a person engaged in business or in non-specified profession. However, such a person is expected to keep and maintain such book of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of the Act, if:-.

Particulars Individual or HUF Any other assessee
In case of existing business or profession, income or gross turnover in any one of the 3 preceding previous years exceeds the following-

o    Income from business or profession

o    Turnover/gross receipts in the business or profession

 

 

 

Rs. 2,50,000

Rs. 25,00,000

 

 

 

Rs. 1,20,000

Rs. 10,00,000

In case of newly setup business or profession, income or gross turnover of the first previous year is likely to exceed the following-

o    Income from business or profession

o    Turnover/gross receipts in the business or profession

 

 

 

Rs. 2,50,000

Rs. 25,00,000

 

 

 

Rs. 1,20,000

 

Rs. 10,00,000

For companies the books of account are prescribed under the Companies Act. Further, the Institute of Chartered Accountants of India has prescribed various Accounting Standards and Guidelines that are required to be followed by the business entities As regards the maintenance of books of account by a professional, who is engaged in specified profession has to maintain certain prescribed books of account, if the annual receipts from the profession exceed Rs. 1,50,000 in all the three years immediately preceding the previous year (in case of newly set up profession, his annual receipts in the profession for that year are likely to exceed Rs. 1,50,000).

Specified profession covers profession of legal, medical, engineering, architectural, accountancy, company secretary, technical consultancy, interior decoration, authorised representative, film artist or information technology.

For more details on the provisions relating to maintenance of books of account you may refer provisions of section 44AA read with Rule 6F of the Income-tax Rules, 1962.

  • Where should the books of account of business be kept and for how long?

All the books of account and related documents should be kept at the principal place of business, i.e., where the business or profession is generally carried on. These documents should be preserved for a minimum period of 3 years from the end of relevant Assessment year, i.e., for a total of 4 financial year from the end of relevant year. However, when the assessment has been reopened, all books of account and other documents which were kept and maintained at the time of reopening of assessment should continue to be so kept and maintained till the assessment so reopened has been completed. However, if the income or entry is exceeding Rs. 50 Lakh then the department has the power to call for the information of the last 10 assessment years as well. So, effectively it is advisable to maintain the books of accounts for the period of 11 financial years.

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