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Introduction
The Income-tax Act does not prescribe any specific books of account to be maintained by a person engaged in business or in non-specified profession. However, as per Section 44AA read with Rule 6F 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:-.
Income Tax Provision
| 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- a. Income from business or profession b. 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- a. Income from business or profession b. 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.
Who is required to Maintain Accounts - Section 44AA
As per the provisions of section 44AA of Income Tax Act, every person carrying on the below profession must compulsorily maintain books of accounts:
- Legal
- Medical
- Engineering
- Architectural
- Accountancy
- Interior decoration
- Technical consultancy
- Film Artist*
- Authorized representative**
- Company Secretary
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What are the books of accounts as per rule 6F?
You must maintain the following books of accounts as per rule 6F:
- Cashbook
- A record of day to day cash receipts and payments which shows cash balance at the end of the day or at best at the end of each month and not later.
- A journal, if the accounts are maintained according to the mercantile system of accounting
- A journal is a log of all day to day transactions. It is a record, in accounting terms, where total credits equal total debits when we follow the double-entry system of accounting ie each debit has a corresponding credit and vice versa.
- A ledger where all entries flow from the journal has details of all accounts, this can be used to prepare the financial statements.
- Photocopied of bills or receipts issued by you which are more than Rs 25
- Original bills of expenditure incurred by you which are more than Rs 50
The assessee must maintain these books of accounts at the Head Office or at each of the offices.
Penalty for Not Maintaining Books of Accounts - Section 271A
In case of a failure to maintain the books of accounts, the assessing officer may levy a penalty under section 271A up to Rs. 25,000. In the case of an international transaction, failure to maintain information and documents for transactions would lead to a penalty of 2% of the value of international transactions.
Case Laws on Section 44AA
Watch our Video on Section 44AB
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