MAINTENANCE OF BOOKS OF ACCOUNTS U/s 44AA
WHO SHOULD MAINTAIN THE BOOKS:
Case I – Persons carrying on specified profession
Specified profession –
- Legal
- Medical
- Engineering
- Architectural
- Interior decoration
- Accountancy
- Technical consultancy
- Film artists(anyone engaged as a professional in the film industry)
Persons carrying on specified profession and his gross receipts exceeds Rs. 1,50,000 in all the three immediately preceding years or in case of a new profession likely to exceed Rs.1,50,000 in the year of set up are required to maintain specified books of account.
Persons carrying on specified profession and not covered above are required to maintain such books of account and other documents as may enable the assessing officer to compute his taxable income.
The Central Board of Direct Taxes is free to add professions to this list.
Case II – Other assessee
In the following cases, assessee is required to keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with this Act.
His income from business or profession exceeds Rs. 1,20,000 or his turnover (gross receipts in case of profession) exceeds Rs. 10,00,000 in any one of the three immediately preceding years. (Limit will be Rs. 2,50,000 for income and Rs. 25,00,000 for turnover in case of Individual and HUF from Financial year 2-17-2018)
In case of newly setup business or profession, his income is likely to exceed Rs. 1,20,000 or his turnover (gross receipts in case of profession) is likely to exceed Rs. 10,00,000 (Limit will be Rs. 2,50,000 for income and Rs. 25,00,000 for turnover in case of Individual and HUF from Financial year 2-17-2018)
Where the profits and gains from the business are deemed profits under section 44AE, 44BB or 44BBB and the assessee has claimed his income to be lower than the profits or gains so deemed
Upto Financial year 2015-16 – Where the profits and gains from the business are deemed profits under section 44ADand he has claimed his income to be lower than the profits and gains so deemed and his income exceeds the maximum amount not chargeable to tax during such year.
From Financial year 2016-17 – where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.
Section 44ADA Presumptive taxation for Professionals – The assessee filing return under section 44ADA is not required to maintain books of account under section 44AA.
BOOKS TO BE MAINTAINED:
- Cash book: A daily record of all cash receipts, payments and cash balance.
- Journal, in case of use of Mercantile Accounting format
- Ledger
- Carbon copies of bills and receipts, with serial numbers, issued by the assessee. This is applicable only if the amount involved in a transaction is more than Rs. 25,000.
- Original bills and receipts for expenditure incurred by the assessee. If bills and receipts are not available, and the expenditure is below Rs. 50,000, then the person can prepare payment vouchers, or input the transaction information in the cash book.
- Those in the medical profession also have to maintain a daily case register in Form 3C, and an Inventory Book of the stock of medicines, drugs, injections, tools and other consumables used in the profession.
PERIOD OF MAINTENANCE OF BOOKS:
The books of accounts are to kept and maintained for a period of six years from the end of the relevant assessment year. In other words accounts are to be kept for seven years from the last date of financial years.
All relevant account books and documents have to be kept at the place of profession, or at the main office of the profession in case there are more than 1 branches, or at each branch office of the profession.
The main purpose of maintaining these records is to ensure that you are not involved in tax fraud or evasion, and if your case comes to income tax scrutiny, the Assessing Officer could check your records of transactions.
Varsha Singh (CA Final)
