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Posted on June 22, 2021
Maintenance of Books under
Section 44AA in India
Every business /profession assesse has to maintain books of accounts so as to enable computing his total income for the previous year.
The provisions regulating compulsory maintenance of books are given in section 44AA along with Rule 6F.
Assessee carrying on Specified Professions (Sec 44AA(1) and Rule 6F)
For the purpose of section 44AA and Rule 6F legal,
“specified professions” includes …
- technical consultancy,
- or interior decoration
- or any other notified profession [i.e., authorised representative, film artist, company secretary andinformation technology].
Circumstances where Maintaining the Prescribed Books of Account is Necessary for the aforesaid specified professionals:
- In these cases, if annual gross receipts (of any one or more of preceding 3 years) do not exceed Rs. 1,50,000, the taxpayer is required to maintain such books of account as may enable the Assessing Officer to compute his taxable income under the tax audit in India.
- If, however, gross receipts are more than Rs. 1,50,000 (of all preceding 3 years), the taxpayer will have to maintain books of account Prescribed Books Of Account and Documents to be kept and maintained under section 44AA(3) by person carrying on Certain Professions [Rule 6F]
As per Rule 6F(1),
any person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist is required to maintain prescribed books of account and documents.
The prescribed Books Of Account and other documents under Rule 6F(2) are as follows:
- a cash book;
- a journal, if the accounts are maintained according to the mercantile system of accounting;
- a ledger;
- carbon copies of bills, whether machine numbered or otherwise serially numbered wherever such bills are issued by the person and carbon copies or counter foils of machine numbered or otherwise serially numbered receipts issued by him excepting if the bill or receipts of an amount less than Rs. 25; and
- original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed Rs.50 , payment vouchers prepared and signed by the person.
The vouchers mentioned above may not be prepared if the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.
As per Rule 6F(3) a person carrying on medical profession shall, in addition to the above books of account and documents, keep and maintain the following also:
- a daily case register in Form No. 3C;
- an inventory under broad heads, as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.
Circumstances where Maintaining the Prescribed Books of Account shall Not be Necessary :
The above Rule 6F(2) of maintaining the prescribed books of account and other documents shall not apply in relation to any previous year in case of any person—
- if his total gross receipts in the specified profession do not exceed Rs. 1,50,000 in any one of 3 years immediately preceding the previous year, or
- where the specified profession has been newly setup in the previous year, his total gross receipts in the profession for that year are not likely to exceed Rs. 1,50,000.
However, such person shall have to maintain such books of account and other documents as may enable the Assessing Officer to compute his total income.
Assesee carrying on other than specified professions:
Every person carrying on any business or a profession (other than professions referred in Rule 6F) are required to maintain such books of account and other documents, as may enable the Assessing Officer to compute his total income, in following cases
(1) If his total income from business or profession exceeds 2,50,000 for Individual or HUF or his total sales/gross receipts from such business or profession exceeds Rs.25,00,000 for Individual or HUF in any of the three years immediately preceding the relevant previous year.
(2) In case of newly set of business or profession, the assessee will be required to maintain accounts if, during the relevant accounting year, either his total income is likely to exceed Rs.2,50,000 for Individual or HUF or the total sales or gross receipts are likely to exceed Rs.25,00,000 for Individual or HUF
(3) If he is carrying on any business covered u/s 44AE, 44BB, or 44BBB and Claims his income to be Lower than the presumptive profit computed under the said sections during the previous year.
(4) If the provisions of section 44AD(4) are applicable and his income exceeds the maximum amount not chargeable to direct tax code from easier ITR filing in any previous year.
When maintenance of Books of Account Not Necessary
There is no need to maintain any books of account and documents if the following conditions are satisfied:
- Assessee is carrying on a business or a profession and the income or total sales or gross receipts, as the case may be, is less than the abovespecified amount.
- If he is covered under sections 44AD, 44ADA, 44AE, 44BB or 44BBB, he should not declare income lower than that which is prescribed under these relevant sections.
Consequences of Failure to Keep Accounts
Section 271A prescribes penalty provisions for failure to keep and maintain books of account, etc., and also for not retaining them for the prescribed period.
The quantum of penalty imposable is fixed at Rs. 25,000.
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.