Maintenance of Books
Different legislative provisions – the Income Tax Act, the Companies Act 2013, and the GST Act – all mandate the keeping of books of accounts, including vouchers and receipts. All three statutes have various criteria for books to be kept, retention periods, and coercion.
If the sale/turnover/gross receipts from the business or profession exceed INR 25,00,000 in any of the previous three years, or the revenue from the business or profession exceeds INR 2,50,000, then books of accounts are required.
This clause applies to the following professions:
Law – Medicine – Engineering – Architecture – Accountancy – Technical Consultancy – Interior Design
Representative Appointed (one who charges fees for representing someone before the tribunal or any authority)
Producers, editors, actors, directors, music directors, art directors, dance directors, cameramen, singers, lyricists, screenwriters or dialogue writers, and costume designers are all examples of film artists.
Secretary to the company
Thus, if any of the above-mentioned professions earned more than INR 2,50,000 in any of the previous three years, they must keep books of accounts. Professionals should keep books even if they are starting a new career and plan to earn more than INR 2,50,000.
Accounts in accordance with Rule 6F
- Bills or receipts in duplicate
- Patients’ names, services given, fees paid, and date of receipt are all recorded in the daily cash register (persons carrying on medical profession)
- Information on the pharmaceuticals, medicines, and other consumables that were utilised (persons carrying on medical profession)
- If the revenue in any of the previous three years was less than INR 2,50,000, or is not projected to be more than INR 2,50,000 in the case of a new profession, then books should be kept
- Cash Book
- Details of stocks and other consumables.
Under the Companies Act, the books of accounts must be kept up to date
Every company is required to keep books of accounts, either at the registered office or at any other location determined by the board of directors. If the firm keeps its books at a location other than its registered office, it must notify the ROC. The corporation can also keep track of its finances electronically.
The length of time that the books must be kept up to date
After the conclusion of the relevant financial year, the books shall be kept for a period of eight years.
Books of Accounts Maintained
- Items which are of higher value or cost
- Records of the assets and the liabilities
- Records of the sales, the purchases and the expenses
- Cash Flow Statement
- Vouchers, title deeds, documents, minutes of meetings, and registers physical or hard copy and also electronic mode.
Books of Accounts to be maintained Under GST
Every registered person is required to keep GST records at their primary business location.
Records to be Maintained
- Manufacture or Production of goods
- Inward and outward supply of goods or services or both
- Stock of inventory or the goods
- Input tax credit which is availed by the company or the entity
- Output tax liability which is payable and paid
- Other particulars which as may be prescribed.
Duration or Length of Time for which Books needs to be Maintained
Books and records should be kept for a period of six years from the date on which the annual return was filed on December 31st of the relevant financial year.
Maintenance of Books of Accounts by Professionals
The laws relating the preservation of books of accounts under the Income Tax Act are addressed in Section 44AA of the Income Tax Act and Rule 6F of the Income Tax Rules. If the yearly gross revenues of the profession exceed INR 1,20,000, the person carrying on any of the professions listed below is obliged to keep books of accounts and other records that may allow the assessing officer to determine his total income under section 44AA (1) read with rule 6F.
- Legal considerations
- Technical Consultancy
- Authorized Representative
- Film Artist
- Interior Decoration
- Any other profession as is notified by the board.
When no books of accounts must be kept by professionals covered by section 44AA (1)
The proviso to Rule 6F (1) states that if a profession’s gross receipts do not exceed INR 120000 in any of the three years immediately preceding the previous year, or if the profession was newly established in the previous year, the total gross receipts in the profession for that year are not likely to exceed the said amount, the professional does not need to keep any books of accounts as specified in Rule 6F subrule 2.
It means that if a profession’s gross receipts exceed INR 120000 in each of the three years preceding the previous year, the books of accounts must be kept; if the gross receipts exceed the prescribed limit in the two preceding years but not in the third preceding year, the books of accounts must be kept.
Other Persons’ Bookkeeping is Covered Under Section 44AA (2)
If the revenue from a business or profession exceeds INR 120000 or the turnover or gross receipts exceed INR 10 lakhs in any of the three years immediately preceding the previous year, the obligation of obligatory bookkeeping applies to them.
When other individuals are not required to keep books of accounts, u/s 44AA (2) applies
If the income, gross revenues, or gross turnover of a person carrying on a business or profession other than that stated in section 44AA (1) does not exceed in any of the three years before the previous year, no books of accounts are necessary (2).
People who file their tax returns under the presumptive income system, such as section 44AD, 44ADA, 44AE, 44AF, and so on, are not required to keep books of account under section 44AA. However, if the earnings and gains from business are judged to be profits and gains u/s 44AD or 44ADA, 44AE or 44AF, 44BB or 44BBB, as case may be, assessee claims his income is lower than profits or gains so deemed, the books of accounts must be kept u/s 44AA.
In the case of the 44AD section, accounting books must be kept up to date
Where profits and gains from a business are deemed to be profits and gains of the assessee under section 44AD and the assessee has claimed such income to be lower than the profits and gains so deemed, i.e., below 8% /6 percent, and the assesse’s income exceeds the maximum amount which is not chargeable to income tax during the previous year, the assessee shall keep and maintain such books of accounts.
As a result, if a person’s income is less than 8% /6 percent of his entire turnover or gross revenues as required by section 44AD and his income exceeds the exempted level, he will be obliged to keep his books of accounts. However, if his total income is less than the exempted level and profits are less than 8% /6 percent of gross turnover or gross receipts, he will not be required to keep mandatory books of accounts.
Who is needed to keep books of accounts if they are covered by section 44AA (1)?
The following books of accounts and papers must be kept in accordance with Rule 6F (2):
1) a cash register,
2) If the accounts are kept under the commercial style of accounting, keep a journal.
3) the ledger
4) serially numbered carbon copies of invoices and carbon copies or counterfoils of receipts issued in excess of INR 25.
5) Original invoices for costs over INR 50, as well as petty expense payment vouchers. However, if the person’s cash book provides sufficient details about the expenditures spent, vouchers are not required for expenses up to INR 50.
Persons engaged in the medical profession are also expected to keep a daily case register in the specified Performa (Form No. 3C) and an inventory of stock of pharmaceuticals, medicines, and other consumables accessories used for the purpose of the profession at the beginning and end of the year.
Ledgers, day-books, cash books, account-books, and other books, whether retained in printed form or as print-outs of data saved in a floppy, disc, tape, or any other type of electro-magnetic data storage device, have also been specified u/s 2(12A).
The electronic record as specified in clause (t) of sub section (1) of section 2 of the Information Technology Act, 2000, has been included in the document u/s 2(22AA).